Trustee: ‘Deal reached in principle’ for SLRG
ALAMOSA — After operating for three years in Chapter 11 bankruptcy, there may be some movement in getting the San Luis and Rio Grande (SLRG) Railroad on track to being sold.
According to William Brandt, founder and CEO of DSI and the trustee handling the sale, there is no final agreement at this time, something that Luke Lyons with the Valley Courier reported Alamosa County Administrator Roni Wisdom emphasized during this week’s commissioners meeting.
But Brandt has confirmed that, on Monday, Sept. 12, he signed a letter of intent.
“A deal has been reached in principle,” Brandt said. “But the deal is still being negotiated.”
That deal is with OmniTRAX, a railroad company headquartered in Denver that currently operates more than a dozen short line railroads across Canada and the US, including Great Western Railway of Northern Colorado — an 80-mile short line railroad that runs to Fort Collins, Greeley, Loveland and other stops in the region.
An affiliate of the multi-million dollar, family-owned Broe Real Estate Group in Denver, OmniTRAX “specializes in freight shipping and freight logistics.”
Currently, Brandt and OmniTRAX are negotiating an assets purchase agreement. Assuming that agreement is reached, the deal will then be submitted to the bankruptcy court, followed by a bankruptcy hearing that Brandt estimates will take place sometime in mid-October.
“So, yes, at this time the railroad has not been sold,” Brandt said.
The Valley Courier has also reported that, during Wednesday’s commissioners’ meeting, Wisdom informed the commissioners that a second group, North Central Railcorp, “may be interested in purchasing the railroad.”
When asked to comment, Brandt said that, at the time OmniTRAX made the offer, he was negotiating with several bidders, including North Central Railcorp. In fact, the group, which he said is based out of Santa Fe, had signed a letter of intent a year ago but, to date, had yet to assemble all the financing needed to make the purchase.
When OmniTRAX made its offer, all negotiations with the other bidders stopped.
Brandt describes OmniTRAX as being a well-known, reliable operator across the country.
But while OmniTRAX has successes in its background it also has some failures, including the 2016 purchase of the Central Texas and Colorado River (CTXR) Railroad, a 67.5-mile short line railroad in central Texas.
OmniTRAX bought CTXR in anticipation of a market expansion in shipping sand used in fracking. That market failed to expand.
According to an Aug. 29, 2019, document posted by the Surface Transportation Board (the federal agency that governs railroads), the CTXR line was embargoed on July 25, 2019, due to “bridge problems and unsafe track conditions.”
On Aug. 9, 2019 — just three years after purchasing the line — OmniTRAX and CTXR petitioned STB to abandon the line, citing the loss of millions of dollars in acquiring and operating the line and asserting the cost of continuing to maintain and operate the line far outweighed the potential revenue from shippers. STB approved the petition, and the line was abandoned.
When asked to comment on the abandonment, Brandt said, “I wasn’t looking for candidates for sainthood in finding a good buyer for the SLRG. And it’s not my job to defend OmniTRAX. But they’re one of the best-known operators in the country and their level of reliability and the exacting management message they use is copied by a lot of folks in the industry.
“They’ve made a habit and a career out of trying to salvage short line railroads. They take a lot of risk in trying to salvage a company and not everything is a winner. A lot of railroads have a lot of problems right now, but SLRG is not one of them. I think SLRG has a bright future with a lot of expansion in the Valley. And I think (that expansion) is what’s attracting OmniTRAX,” Brandt said.
“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 competent marketing team that knows what they’re doing. OmniTRAX has no plans to abandon any trackage, including the trackage west of Monte Vista. Frankly, it’s probably one of the more qualified operators we could be selling to. You couldn’t put the railroad in better operator’s hands,” Brandt said.
OmniTRAX has offered a bid of $5.75 million. However, SLRG is also carrying a significant debt related to back taxes. According to Brandt, using figures projected through Nov. 30 — when a sale might be approved — there is currently a debt of $3,805,000 in property taxes due to the five counties where SLRG runs in the Valley plus $141,500 in back withholding due to the Colorado Department of Revenue. That’s a total debt of $3,946,500 due out of a $5.75 million sale price.
Brandt said that bankruptcy court allows for individuals protesting the sale, including those who may assert their offer is better than OmniTRAX, to make their case.
If Omnitrax’s offer is accepted by the court, they will have to file an application with the STB.
“Omnitrax has a good reputation and, I’m assuming, the STB will look favorably upon the sale,” Brandt said. “But you can’t always tell what they’re going to do.”