UPDATE 1-Railway in Quebec disaster gets Canada bankruptcy protection

Thu Aug 8, 2013 6:23pm EDT
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By Leila Lemghalef and Dave Sherwood

MONTREAL/BANGOR Aug 8 (Reuters) - The U.S. railway whose runaway train killed 47 people in a tiny Quebec town last month was granted bankruptcy protection from a Canadian court on Thursday and took steps in that direction in a U.S. court as well.

Montreal Maine & Atlantic railroad filed for protection in both countries on Wednesday, saying its revenues had deteriorated since the July 6 crash and it could not afford to pay its mushrooming financial obligations.

The company's runaway crude oil train derailed in the small lakeside town of Lac-Megantic, Quebec, exploding in huge fireballs that destroyed a swathe of the town's core. About 5.6 million liters of crude oil were spilled, and MMA estimated the cleanup costs would exceed C$200 million.

Quebec Superior Court Judge Martin Castonguay called the company's behavior "deplorable" and said he was not impressed by its management.

"This decision is to prevent legal anarchy," Castonguay told the courtroom after approving the bankruptcy protection for MMA's Canadian unit.

Also on Thursday, a U.S. federal judge in Maine ordered the appointment of a federal trustee to oversee MMA's bankruptcy proceedings and help ensure that the railroad remains in operation so that service continues for local companies.

Thursday's decision allows the railway to continue to operate and meet its payroll obligations through Aug. 22, when another hearing will be held.   Continued...