McMillan helps complete the cross-border sale of assets of Montreal, Maine & Atlantic railway deals

McMillan LLP and Sidley Austin LLC represented Fortress Investment Group (NYSE:FIG) in the purchase of the assets of the Montreal, Maine & Atlantic Railway, Ltd. railway (MMA), which was subject to bankruptcy court protection following the tragic derailment at Lac-Mégantic, Québec on July 6, 2013.

McMillan organized and obtained regulatory approvals for a new Canadian federal railway company named Central Maine & Québec Railway Canada Inc. which, together with its American counterpart, Central Maine & Quebec Railway US Inc., purchased the assets out of a cross-border insolvency (see cmqrailway.com).

It was clear from the outset that the cross-border acquisition of the insolvent MMA’s assets would be especially complex in Canada. It would present novel and challenging legal and business issues, including many court appearances as well as numerous and intricate multiparty negotiations, all within the context of intense public scrutiny.

To complete the transaction, many interests had to be satisfied, including:

• The City of Lac-Mégantic, which endured Canada’s most deadly derailment in almost 150 years and was concerned about the resumption of rail service through the City, particularly the carriage of Dangerous Goods such as crude oil, countered by needs within the local economy;
• The Province of Québec and its Ministry of the Environment, which was paying for, and continues to pay for, the cleanup of the environmental damage caused by the derailment and had to balance the cost of retaining clean-up obligations with the benefits to the province of the railway continuing to operate;
• The Canadian Transportation Agency and Transport Canada who were examining and changing insurance adequacy and rail safety standards for all Canadian federally regulated railways while attending to the concerns of many stakeholders about this railway in particular;
• Creditors and customers of the railway;
• Both the purchaser and seller which needed to ensure that, in the end, the railway could be a viable commercial operation.

In the context of this unique and challenging environment, McMillan led the Canadian side of the negotiations, acquired favourable court orders, and gained the necessary regulatory approvals and consents, even as the multi-faceted regulatory environment was changing.

While the railway struggled to survive in this challenging environment, the relatively less politicized U.S. side of the transaction was completed efficiently by Sidley & Austin.

The sale agreement was signed on December 12, 2013 and the final transaction closed on June 30, 2014.

The McMillan team from the Toronto, Montréal and Vancouver offices was led by François Tougas (rail and other regulatory, commercial) and Wael Rostom (restructuring/insolvency and commercial). Other firm members included: Charles Chevrette (corporate); Stéphanie Hamelin (environmental and real property/immovables); Marc-André Morin (insolvency and litigation); Ryan Gallagher (rail and customs regulatory); Henry Krupa (environmental); Phillip Duffy (real property); Robert Boyd and David McInnes (labour and employment); Peter Botz (international and corporate tax); Jamie Wilks (commodity tax).

In addition to Sidley Austin’s Chicago and Washington offices, other firms involved were Gowlings for MMA Canada, Woods LLC for the Monitor for MMA Canada and Bernstein Shur for the estate of MMA.