On Sept. 9, Big Shoulders Capital LLC, filed a motion in U.S. District Court in Northern Illinois to appoint Novo Advisors as the receiver for Colorado’s San Luis & Rio Grande Railroad Inc. and Oregon’s Mt. Hood Railroad Co. A company or property is placed in receivership to protect the assets of an organization when it cannot meet its financial obligations or enters bankruptcy.
The court granted receiver appointment the same day Big Shoulders Capital filed its motion. According to court filings, the owner of the two railroads consented to the properties being put into receivership.
Iowa Pacific acquired the San Luis & Rio Grande in 2005 and Mt. Hood in 2008. Both railroads offer freight and excursion services.
In a statement to Trains News Wire, Iowa Pacific President Ed Ellis writes that the move “was necessary to continue funding with our lenders.”
Ellis adds that both railroads will continue to operate as normal while in receivership.
According to court records, in 2017 the railroads took a $5 million loan from Big Shoulders Capital, an Illinois-based investment firm. The railroads have since defaulted on the loan and currently owe the investment firm more than $4.6 million.
Court documents state the railroads are also subject to “substantial claims” by the Internal Revenue Service.
“The appointment of a receiver is necessary in this case because Defendants are unable either to satisfactorily operate and manage their businesses or to maintain and preserve their assets,” attorneys for the investment firm write.
Court documents note that the Surface Transportation Board has been notified that the railroads are being placed into receivership and that it has no objections, noting that it expects the railroads to “continue to operate and serve the public.”