Trustee expects to close railroad sale
in early 2022

by clopez | clopez@alamosacitizen.com

ALAMOSA, CO

WILLIAM Brandt, the trustee in the San Luis & Rio Grande Railroad bankruptcy, said he plans to accept an offer for the railroad as early as October and expects the sale to a new owner to be approved in federal bankruptcy court in early 2022.

“The speediest we can finish this deal is late January and early February,” Brandt told The Alamosa Citizen in a telephone interview.

“I have moved and pivoted well into the sales process,” he said. “I’d say I’m in the fourth quarter of these kinds of games.”

He’s been around a few of them as founder and executive chairman of Development Specialists, Inc., or DSI, and this one is complex with two separate bankruptcies filed that impact Alamosa and the San Luis Valley.

Brandt is the trustee for the San Luis and Rio Grande Railroad bankruptcy, and Tom Connelly is the trustee for Heritage Rail Leasing bankruptcy which owned the train cars stored in Alamosa and on tracks across the San Luis Valley.

Both San Luis and Rio Grande Railroad and Heritage Rail Leasing were principal subsidiaries of Iowa Pacific, and both were involuntarily placed into Chapter 11 bankruptcy two years ago.

‘We put the railroad back in shape’

Brandt was appointed San Luis & Rio Grande Railroad trustee on Dec. 30, 2019 by the U.S. Bankruptcy Court for the District of Colorado and he immediately went to work restructuring the railroad and getting it in shape so qualified companies would take an interest in owning the 150 miles of tracks that stretch from La Veta to South Fork.

Brandt confirmed a sales price range of $7.5 million to $8 million for the San Luis & Rio Grande Railroad. “All you’re really buying is 150 miles of track,” he said.

He wasn’t complimentary of the past ownership of the railroad, and said he has put in about $1.3 million to rehabilitate railroad tracks – both laying new tracks and repairing old ones. He also said he’s spent about $250,000 cleaning up the railyard of 1,000 or so train cars that were being stored in Alamosa and on track lines to South Fork.

“The railroad sets the tone for the city,” said Brandt, offering why cleanup of the Alamosa railyard and the tracks themselves was important. “The railroad can be symbolic for a renewal of downtown Alamosa.”

Over the past year the freight business of the San Luis & Rio Grande Railroad has picked up and helped pay for the improvements, Brandt said. The Perlite mine in northern New Mexico and Red Hill Lava based in Antonito are both strong customers, and Coors continues to use the railroad heavily to ship barley and hops.

Brandt said the railroad has five to six repetitive and major customers, and he expects the freight business to continue to pick up as the economic recovery from COVID-19 shifts into 2022.

“We are glad our freight operations have picked up because the revenue from that is covering some of the losses from lots of stored cars,” Brandt said.

“We put the railroad back in shape. The trains are running on time. Some of the customers are committing to economic expansion and that means more jobs for the San Luis Valley.”

How short line railroads make money

The new owner of the San Luis and Rio Grande train tracks will also determine if there is any revival of the passenger excursion train that took people to the La Veta Pass area for concerts. 

Short line railroads like the San Luis and Rio Grande make their money from moving freight and from storing cars. The last owner also attempted to bring in revenue through passenger excursions, which both trustees questioned.

In his role as trustee, Brandt said his obligation is to serve the public interest and to make sure San Luis and Rio Grande Railroad has a qualified buyer to run it as a freight railroad. He said there are specific provisions in the federal bankruptcy code that relate solely and only to railroad companies.

“You can’t just buy a railroad,” Brandt said, explaining how the Surface Transportation Board, an independent federal agency that governs railroads, looks at the sale of railroads. 

“I’m doing the most I can to maintain the railroad, and I take the public interest dictate very seriously,” he said.

He said the San Luis and Rio Grande Railroad, “will be put in the hands of a qualified operator, someone who already operates short lines around the country.”

For Alamosa, built as a railroad town, it is the best outcome possible.