SAN Luis & Rio Grande Railroad Trustee William Brandt is pushing for a closing to the sale of the railroad to OmniTRAX and laid out the terms of the sale agreement in a filing submitted to the U.S. Bankruptcy Court in Colorado on Wednesday.
The railroad trustee has asked the court to give parties until Nov. 2 to file objections to the $5.75 million sale of the historic railroad to OmniTrax, which is headquartered in Denver.
As first reported by Alamosa Citizen, Brandt notified the bankruptcy court on Sept. 12 that he had entered into a letter of intent to sell the San Luis & Rio Grande Railroad to OmniTrax. He’s now entered into an asset purchase agreement with OmniTrax to move the sale forward to a closing, according to the latest court filing.
The San Luis & Rio Grande Railroad operates along approximately 150 miles and crosses through Alamosa, Rio Grande, Huerfano, Costilla and Conejos counties. Brandt was appointed SLRG Trustee on Dec. 30, 2019, two months after the railroad filed for involuntary bankruptcy.
Brandt said that while he has had other inquiries about the railroad, OmniTrax is the only company that has committed to the $5.75 million asking price that was established during the court proceeding.
“We’re excited to move forward in the process,” said OmniTrax Senior Vice President Brian Ward in response to an email from The Citizen.
A note from the filing:
The Trustee and his advisors have had direct contact with over 65 parties who have expressed interest in purchasing the Debtor’s assets; over 41 parties have executed Non-Disclosure Agreements with the Trustee and have conducted due diligence on the Debtor’s assets, liabilities and its business operations through a data room. Additionally, six separate groups have visited the Debtor’s railyard in Southern Colorado and eight have conducted interviews with the Debtor’s employees. The Trustee has received five letters of intent from parties to purchase the assets of the Debtor and has received other verbal offers of interest.
Real estate taxes owed to counties
The Debtor has not paid the majority of its real estate taxes since 2012. The following claims of amounts owed through June 2022, which include interest, have been filed:
- Rio Grande County: $877,157
- Conejos County: $635,131
- Costilla County: $390,454
- Alamosa County: $739,000
- Huerfano County: $1,180,122
source: Bankruptcy Court Filing
- READ THE COURT FILINGS HERE
Brandt said Big Shoulders Capital offered $4 million in an earlier bid that he rejected.
“On August 4, 2022, Big Shoulders submitted a written offer to the Trustee to acquire the SLRG assets and to maintain operations of the SLRG railroad. The Trustee did not accept the offer as he believed the cash purchase price was significantly below the fair market value of the Debtor’s operations,” according to the latest court filing.
Brandt told Alamosa Citizen in an interview that “if Big Shoulders wants to show up and match with cash, I’m all good.”
North Central Railcorp, another party that has expressed interest, has not been able to secure financing to at least match the OmniTrax offer, Brandt said.
“It’s time to put your money where your mouth is,” Brandt said of others who have shown interest or have criticized the proposed sale to OmniTrax.
“This will flush them out or reveal them as all talk and no money,” he said about Wednesday’s bankruptcy court filing on the proposed asset purchase agreement with OmniTrax.
Alamosa County Manager Roni Wisdom said she hadn’t yet reviewed the proposed asset purchase agreement and couldn’t comment until she did.
Under the proposed terms of the sale, Alamosa County and others who are owed real estate taxes would be paid through the sale of SLRG to OmniTrax.
If U.S. Bankruptcy Judge Thomas B. McNamara approves the sale of the railroad to OmniTrax, the company then has to gain approval to operate the San Luis & Rio Grande Railroad from the Surface Transportation Board. Until that step is completed, the trustee will continue to oversee railroad operations.
Brandt said it could take another two months or so to get approval from the Surface Transportation Board, which is why he doesn’t think the sale would close until the early part of 2023.
“This is the best offer that I have in hand and I’m going to see it through,” Brandt said. “This has to end sometime and this is the beginning of the end.”
More from the filing: Condition of the railroad
Critically, he inherited a railroad with ongoing pre-petition and post-petition safety violations that had been assessed against the Debtor by the Federal Railroad Administration that not only endangered the health and safety of the Debtor’s employees and the public, but also could have resulted in the assessment of penalties by the Federal Railroad Administration (“FRA”) against the Debtor for over $700,000.00. The safety violations were fixed; the Trustee reached a settlement with the FRA to resolve the assessments against the Debtor. The Trustee’s efforts have been successful. The FRA inspected the railroad the week of April 14, 2021 and found no violations. In addition, the signals inspector noted in his report that “there has been significant improvement of maintenance, procedure, depth of knowledge, and excellence. Your efforts and commitment to safety are greatly appreciated.” The APA, like all purchase agreements related to a railroad, requires significant disclosure of ongoing and known FRA violations. The fact that the Debtor has no violations is materially significant to potential purchasers.
In addition, the Trustee has spent significant time and funds on repair and maintenance of the rail line. The railroad has been “shored up” and the trains no longer tilt when making the requisite turns up and over La Veta Pass. Finally, the Trustee has worked diligently to maintain the Debtor’s daily operations and schedules. No longer are shipments routinely days to weeks late in reaching their destinations. No longer are the Debtor’s employees fielding daily complaints from its customers.