MMA railway granted bankruptcy protection
Published Thursday, August 8, 2013 10:13AM EDT Last Updated Thursday, August 8, 2013 6:28PM EDT
MONTREAL -- The railroad involved in the fatal Lac-Megantic train derailment was granted creditor protection Thursday in a Canadian court, a decision expected to increase the value of the company's assets and speed up the payment process.
A Quebec Superior Court justice handed down the ruling after a request by Montreal, Maine & Atlantic Canada Co., a firm facing hundreds of millions of dollars in lawsuits, other legal claims and environmental-cleanup costs linked to the disaster.
Justice Martin Castonguay told a Montreal courtroom he hopes the decision will limit the "judicial anarchy" of multiple creditors simultaneously seeking cash from the insolvent railway through separate legal avenues.
In court documents filed Wednesday, the company said it was seeking relief from its creditors under the Companies' Creditors Arrangement Act.
The railway estimates the cleanup costs will exceed $200 million. The Canadian firm stated in its filing it has just under $18 million in assets and insurance coverage of $25 million, cash it has yet to receive from its insurer.
On July 6, an unattended MMA train loaded with crude oil roared into Lac-Megantic and derailed, setting off huge explosions, destroying much of the downtown core and killing 47 people. The crash also released millions of litres of crude into the environment.
The town and the Quebec government have sent legal notices to the railway, demanding that it reimburse Lac-Megantic nearly $7.8 million in mop-up costs. Taxpayers had to pick up the bill after MMA failed to pay workers it had hired for the cleanup.
The railway has faced considerable public criticism over how it has responded to the disaster.
Even the judge added his own comments Thursday, describing MMA's actions since the derailment as "lamentable."
"The court is not at all impressed with the conduct of MMA since the start," Castonguay said without elaborating, shortly after granting the creditor protection.
Asked about the judge's remarks, a lawyer representing MMA in Canada declined to comment.
But Denis St-Onge did say he was satisfied with Castonguay's ruling, which he expected would speed up the legal process.
"We will have one single forum within which all the claims will be assessed," said St-Onge, who believes the court decision will allow MMA to restart rail service in Lac-Megantic and maximize the value of its assets.
"MMA will no longer be the same, but the people over there, the businesses over there, I think they need a railway, either it's MMA or it's someone else. And in the meantime, some of them need a railway badly."
The attorney representing the municipality of Lac-Megantic was pleased that one court would now be in control of how creditors will eventually be paid.
"The judgment will organize the liquidation of MMA," said Louis Coallier.
"It's a legal (decision), but it's also a human decision."
The company's woes also made their way this week into a U.S. court, where parent firm Montreal, Maine & Atlantic Railway Ltd. initiated proceedings Wednesday for Chapter 11 bankruptcy protection.
Documents filed in the Maine court say the parent company has between $50 million and $100 million in estimated assets and between $1 million and $10 million in estimated liabilities. The bankruptcy-court filing was posted on the website of Maine's Bangor Daily News.
Ed Burkhardt, chairman of both firms, said in a statement Wednesday the "obligations of both companies now exceed the value of their assets, including prospective insurance recoveries."
In Canada, Castonguay said he would like future hearings on the matter to eventually be presided over by another judge in the region of Lac-Megantic, which is about 250 kilometres east of Montreal. The next court date is scheduled for Aug. 23 in Montreal.
"The people of (Lac-Megantic) have a right to know what's going on," said Castonguay, adding they should not be forced to make a two-hour drive to Montreal to follow proceedings.