CHICAGO — Nearly two dozen entities associated with Iowa Pacific Holdings were placed into receivership last week as the depth of the company’s financial troubles continues to spill into public view.
Last month, one of Iowa Pacific’s creditors, Big Shoulders Capital LLC, filed a motion in U.S. District Court in Northern Illinois to place Iowa Pacific railroads in Colorado and Oregon into receivership after the railroads failed to make loan payments [See “San Luis & Rio Grande, Mount Hood Railroad placed into receivership,” Trains News Wire, Sept. 13, 2019]. According to court records, Iowa Pacific and its associated companies owe Big Shoulders more than $4.6 million.
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.
Soon after Novo Advisors was appointed receiver of the two railroads, it filed a motion to place more of the company’s properties into bankruptcy protection. [See “Hearing set to place other Iowa Pacific railroads into receivership,” Trains News Wire, Spet. 23, 2019.] A hearing was set for Sept. 25, but was later delayed because of objections filed by other Iowa Pacific creditors that have alleged the company also owes them millions of dollars.
On Sept. 23, Kenneth Bitten of Mid-Atlantic Rail Car filed a motion alleging that Iowa Pacific and its president, Ed Ellis, owed his company hundreds of thousands of dollars for approximately 40 passenger cars he sold to the company a decade ago. In the days and weeks since, other companies and individuals have made similar claims, including Independent Locomotive Leasing, LLC, and RailWorks Corporation.
In a separate case in U.S. Bankruptcy Court in Colorado, three other creditors — the San Luis Central Railroad, Ralco, LLC, and the South Middle Creek Road Association — alleged that the San Luis & Rio Grande owed them a combined $1 million. The three creditors filed a motion to force the San Luis & Rio Grande into bankruptcy but that effort was in violation of the Illinois court’s appointment of a receiver and thus invalidated. It is possible that the three creditors in Colorado will join the the Illinois case as intervenors.
On Oct. 18, a month after Nova Advisors had made its request to expand the receivership, Judge Thomas M. Durkin signed an order placing 22 companies associated with Ellis into receivership. Included in the order were Iowa Pacific Holdings, Permian Basin Railways, Saratoga and North Creek Railway, Chicago Terminal Railroad Company, Hoosier State Train LLC, and others. The motion to expand the receivership did not include the Mass Coastal Railroad, a freight and passenger railroad on Cape Cod, but noted that it could be included at a future date.
According to court documents, the railroads are also subject to “substantial claims” by the Internal Revenue Service.
In September, auction company Ozark Mountain Railcar had listed a number of Iowa Pacific locomotives and cars for sale in an apparent effort to raise money to cover the company’s debts. Included in the listing were two steam locomotives, multiple F and E units and two rare BL2s, along with numerous passenger cars.
Iowa Pacific was founded in 2001 and has operated numerous freight and tourist railroads across North America.
