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Monday, December 21, 2009

RailAmerica to terminate of OVR lease with CP

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RailAmerica, Inc. says its subsidiary RaiLink Canada Ltd. has closed on a transaction with the Canadian Pacific Railway to terminate its lease of the Ottawa Valley Railway line. Under the terms of the agreement, RailAmerica, Inc. received C$73 million in gross proceeds. The company estimates net cash proceeds after taxes and transaction related expenses of C$69 to C$70 million.

RailAmerica's subsidiary will terminate its lease of the CP-owned OVR rail line between Smiths Falls and Camspur, near Petawawa, Ont., effective upon clearance of the remaining cars from the line. Under the Canada Transportation Act, CP has 60 days to decide if train service will be restored on the line. RailAmerica's subsidiary will continue to maintain and operate the CP-owned rail lines between Sudbury and Mattawa, Ont., Mattawa and Temiscaming, Que., and Mattawa and Camspur until dates in 2010 to be determined by CP.

The OVR operation consists of 342 main line miles of track and primarily transports bridge traffic, chemicals and pulp and paper products. For the nine months ended September 30, 2009, total revenue for OVR was C$13.3 million, operating income was C$4.6 million, depreciation/amortization expense was C$0.4 million and capital expenditures were C$0.7 million. The company will record the income or loss from these operations in discontinued operations beginning in the fourth quarter of 2009.