After nearly a year of negotiation, Iron Road Railways Inc. completed its acquisition of Bangor and Aroostook Railroad Co. last Friday, but observers are still piecing together details of the complex deal.
The sale closes the books on a long series of negotiations since 1992 when Canada's CP Rail System sought to pare off its operations in Maine and New Brunswick, while BAR owner and textile giant Fieldcrest Cannon Inc. tried to exit the rail business following a failed takeover bid.The two unrelated events became connected last June when Washington-based Iron Road emerged as the buyer for the BAR. As time ran out on a January deadline for CP's abandonment plans, Iron Road also became the logical candidate to acquire the western half of the Maine line, which joins the 420- mile BAR at Brownville.
CP sold the eastern half of its east-west line, including the New Brunswick operation, to J.D. Irving Ltd., based in Saint John. But financing for Iron Road was tougher because of the simultaneous BAR deal.
With the BAR negotiations still unfinished, Fieldcrest took on the additional CP track through a subsidiary in January. Last Friday's deal finally gets Eden, N.C.-based Fieldcrest out of the railroad business, giving Iron Road control of both the BAR and the new Canadian American Railroad, running on former CP track east of Sherbrooke, Quebec, for 178 miles.
Industry insiders still are trying to calculate the real value of the deal, in part because it helps to benchmark other Northeast rail holdings.
Iron Road's president, Robert T. Schmidt, confirmed that the $28 million price announced Friday was only for the BAR and did not include the CAR. The BAR price included $20 million in cash and $8 million in debt still held by Fieldcrest, a company official said.
The official also confirmed earlier reports that the price paid to CP for the CAR track in January was $2 million in cash and $14 million in debt held by CP. But while the BAR price was calculated in U.S. dollars, the CAR was in Canadian money, making its price the equivalent of US$11.3 million.
The separate price paid for the CAR track would make the total of last Friday's deal $39.3 million.
The Fieldcrest official said the company did not publicize the price paid for the CAR on Friday because it had very little money in the January transaction, which was said to be backed almost entirely by CP and the state of Maine. Tim Humphreys, a CP spokesman in Montreal, declined comment, citing company policy. A Maine transportation official said he had no knowledge of any state financial involvement.
Mr. Schmidt confirmed that financing for the deal includes a lease-back arrangement on the BAR's equipment. The principal senior lender is the CIT Group, with headquarters in Livingston, N.J. Financing also was provided by Residual Based Finance Co. of Chicago.
The BAR has $27 million in annual revenue, over 300 employees, 38 locomotives and 3,000 freight cars, Iron Road said. The agreement for the CAR includes a haulage arrangement with CP to Montreal and an option for trackage rights.
Iron Road's other properties include Nova Scotia's Windsor & Hantsport Railway, acquired last year from CP, and the Iowa Northern Railway, a 140-mile shortline.