Could obstructions lie ahead for sale of SLRG Railroad?

The SLRG Railroad sale still has to be approved by a bankruptcy judge File photo

Discussions ongoing with creditors

ALAMOSA — By all accounts, the sale of the San Luis Rio Grande Railroad to OmniTRAX seems to be inching forward down the tracks, but the sale’s trustee William Brandt said it’s “not a done deal yet.”

“The nature of OmniTRAX’s press release left the indelible impression that the sale of the railroad is complete,” said Brandt. “That’s not quite the case. We have a signed contract but it still has to go before the bankruptcy judge for approval.”

Brandt believes a hearing in bankruptcy court will be scheduled no sooner than the second week of November. He said Nov. 10 would be a reasonable date for the hearing to happen. 

But objections to the sale might have an impact on the date.

In the motion, there is a period set aside for objections to the sale to be filed with the bankruptcy court by Nov. 2. Brandt said he thinks the judge may not set the hearing until he sees what kind of objections are filed.

Also, during the hearing, if there are other bidders who wish to show up in court and bid more than OmniTRAX has offered, the bankruptcy judge will allow it.

But another significant contingency is also at play, and it is one that is yet to be resolved.

Five counties in the valley are also listed among the creditors and are owed a substantial amount of money in back taxes, which will have to be paid out of the proceeds of the sale.

As was reported in the Sept. 16 issue of the Valley Courier, OmniTRAX has offered a bid of $5.75 million. 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 is a total debt of $3,946,500 due out of a $5.75 million sale price, leaving $1.8 million to pay all others who are due.

Brandt said he currently is speaking to the counties about how much of those back taxes owed they are willing to accept.

“The issue is we’ve got a deal,” he said. “It’s not a deal that puts a lot of money in the bankruptcy estate’s pocket. If there aren’t any bidders that will pay more (than what OmniTRAX has bid), then we need to talk to the counties about how we apportion the proceeds.

“The counties have begged me by hook or crook to keep pulling rabbits out of my hat to keep the railroad going, and I’ve been doing that for coming up on three years. And they want that because they want the economic development the railroad offers. But, on the other hand, if they’re going to say ‘we want to be paid as full as everybody else or be damned,’ that’s a problem. At some point, I’m going to need some compromise from the counties that the other creditors who stuck it out will see a fair shake, as well.”

There is another course of action, however, Brandt said.

“We’re still not certain we won’t shut down the railroad,” he said. “If the sale proceeds are insufficient, we might contemplate shutting down the railroad and selling off the assets which might provide a better return to creditors. At some point, if the counties don’t want that to happen, they need to bargain with us over how the creditors get paid.”

If Brandt and the counties can reach an agreement, the bankruptcy court approves the sale and there aren’t any qualified bidders who bid a higher price, then OmniTRAX will be the buyer.

After that, as part of the regulatory approval process, the sale has to be sent to the Surface Transportation Board for the final okay.

But there’s still some distance to be traveled before this train rolls into the station.  

“We’ve talked to over 60 people and, at this point, there is one deal that qualifies,” Brandt said. “This is a bankruptcy, and in a bankruptcy, you have to put your money where your mouth is.”


Video News