ALAMOSE – After operating for three years in Chapter 11 bankruptcy, there may finally be some movement to put the San Luis and Rio Grande Railroad (SLRG) on track to be sold.
According to William Brandt, founder and CEO of DSI and trustee in charge of the sale, there is no definitive agreement at this time, which Luke Lyons with the Courie ValleyAlamosa County Administrator Roni Wisdom said during the commissioners’ meeting this week.
But Brandt confirmed that on Monday he had signed a letter of intent.
“An agreement has been reached in principle,” Brandt said. “But the deal is still being negotiated.”
This agreement is with OmniTRAX, a Denver-headquartered railroad company that currently operates more than a dozen shortline railroads in Canada and the United States, including Great Western Railway of Northern Colorado – an 80-mile shortline railroad serving Fort Collins, Greeley, Loveland, and other stops in the area.
A subsidiary of Broe Real Estate Group, a multi-million dollar family business in Denver, OmniTRAX “specializes in freight forwarding and freight logistics.”
Currently, Brandt and OmniTRAX are negotiating an asset purchase agreement. Assuming a deal is reached, the deal will then go to bankruptcy court, followed by a bankruptcy hearing which Brandt says will take place around mid-October.
“So, yes, at the moment the railroad has not been sold,” Brandt said.
The valley mail also reported that, at Wednesday’s commissioners’ meeting, Wisdom informed the commissioners that a second group, North Central Railcorp, “may be interested in purchasing the railway.”
When asked to comment, Brandt said that at the time OmniTRAX made the offer, it was negotiating with several bidders, including North Central Railcorp. In fact, the group, which he says is based in Santa Fe, had signed a letter of intent a year ago but, to date, had yet to raise all the necessary financing for the purchase.
When OmniTRAX made its offer, all negotiations with other bidders ceased.
Brandt describes OmniTRAX as a reliable and well-known operator across the country.
But while OmniTRAX has successes in its track record, it also has a few failures, including the 2016 purchase of the Central Texas and Colorado River (CTXR) Railroad, a 67.5-mile shortline railroad in the central Texas.
OmniTRAX purchased CTXR in anticipation of an expanding market for shipping sand used in hydraulic fracturing. This market failed to develop.
According to an 8/29/2019 document released by the Surface Transportation Board (the federal agency that governs the railroads), the CTXR line was embargoed on July 25, 2019, due to “bridge issues and weather conditions. dangerous paths”.
On August 9, 2019 – just three years after purchasing the line – OmniTRAX and CTXR asked STB to abandon the line, citing the loss of millions of dollars in acquiring and operating the line and claiming the cost of continued maintenance and operation of the line. greatly exceeded the potential revenue of shippers. The STB approved the petition and the line was dropped.
When asked to comment on the dropout, Brandt said, “I wasn’t looking for sainthood candidates by finding a good buyer for the SLRG. And it’s not my job to defend OmniTRAX. But they are one of the most well-known operators in the country and their level of reliability and the rigorous management message they use are copied by many in the industry.
“They have made a habit and made a career out of trying to save the shortlines. They take a lot of risk trying to save a business and it’s not all good. A lot of railroads are having a lot of problems right now, but the SLRG is not one of them. I think SLRG has a great future with lots of expansion in the valley. And I think (this expansion) is what attracts OmniTRAX.
“There are no guarantees in life. But they can write a check to buy the railroad and they can write a check to improve it. And they have a very capable marketing team that knows what they’re doing. OmniTRAX does not intend to abandon any lane, including the lane west of Monte Vista. Frankly, he’s probably one of the most qualified operators we could sell to. You couldn’t put the railroad in the hands of a better operator.
OmniTRAX offered a bid of $5.75 million. However, SLRG also bears a significant debt related to tax arrears. According to Brandt, using numbers projected through Nov. 30 — when a sale could be approved — there is currently a debt of $3,805,000 in property taxes owed to the five counties where SLRG runs in the Valley, plus $141,500 in withholding due to the Colorado Department of Revenue. That’s a total debt of $3,946,500 owed on a sale price of $5.75 million.
Brandt said the bankruptcy court allows people who protest the sale, including those who can argue their offer is better than OmniTRAX, to make their case.
If Omnitrax’s offer is accepted by the court, they will have to file a claim with the STB.
“Omnitrax has a good reputation and I suspect the STB will consider the sale favorably,” Brandt said. “But you can’t always tell what they’re going to do.”