In my weekly trip to the federal courthouse to peruse the public PACER terminals, I found two interesting filings in the Wasatch bankruptcy case. Wasatch filed a motion to dismiss or convert (Convert? What does that mean?) the case. In the document Wasatch's lawyers state that the business is dead due to a stop work order issued by Mendocino Railway. They are the people who operate the Skunk train and is a subsidiary of the Sierra Railway.

The attorneys for the Skunk Train responded, stating that:

1. WRRC over-billed them.
2. WRRC allegedly stole materials (scrap metal) and gave it to a vendor owed money and that the alleged theft is being investigated by law enforcement.
3. WRRC was paid money to keep the payroll going, and WRRC laid off employees anyway.

I wonder where that money went if the employees weren't paid?

The relevant documents are attached.

IANAL, but my understanding is that the word "convert" is used to refer to the process of changing from a Chapter 11 Bankruptcy (reorganization) to a Chapter 7 Bankruptcy (liquidation.)

For one thing, Mendocino should've never messed with Wasatch, and Wasatch should've never messed with Mendocino. Both sides have enough of their own legal problems, and clearly never should've been in touch with each other to begin with.

I'm about as far from being knowledgeable on bankruptcy law as one can get.

With that disclaimer, the way it all reads to me is the Wasatch is now saying it does not see a way to stay alive and that a ch.7 liquidation is around the corner. From the list of creditors and the total millions owed I don't see any way Wasatch can survive.

Seems to me that common sense tells you that their name has now been sufficiently damaged to make future viability impossible?

Time will tell. Ross Rowland

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Again this all of us trying the decipher legal speak but as far as I can tell the short story is that the restructuring plan was to sell the company to Mendocino from which the money from the sale would be used to cover Wasatch's current "secured debt" (i.e. K&T 14 settlement, money the state park service wants back, etc) and hopefully would cover the smaller unsecured debts outstanding with a bunch of their other vendors. Said debts currently being held by this Gold Cost Bank company to the tune of 1.3 million and some change.

Appears to have been an "all eggs in one basket" type deal that got completely derailed by this disagreement over the gondolas of scrap metal and work being done to Mendocino's cars. Thus they're basically explaining to the court that Chapter 11 would be trying to get blood from a stone and that route is now pointless. The last paragraph seems to indicate that they're asking the Gold Coast Bank to advise them to either go Chapter 7 or cut the company down to something workable to where they would pay small amounts on the debt over a long period of time (which a few of their creditors probably wouldn't take well).

Does it seem odd to anyone other than me that the customer would want to claim or maintain ownership of any scrap steel generated in the rebuilding of cars? There’s seems to be a lot more to this story than can be gleaned from these documents.

50 cars times x amount in pounds of steel/aluminum times current scrap rates equals money.

Any idea what cars these were? I am assuming freight cars that needed to be rebuilt.

About $13,000.00 (per the papers on file)

Rereading it, $13K appears to be a claim by Hopper against Wasatch for previousLy owed money. Hence, Hopper did not pay for the scrap received and likely applied it against what was owed.

If Wasatch not being paid for the scrap prevented them from continuing work, then I could see how Mendocino might have some sort of interest in the scrap.

All conjecture on my part. I’ll wait for the lawyers to weigh in.

has the K&T 0-6-0 made any forward progress in the last year or two?

1 606-376-5330 why don't you call them and ask?

Not really anything new on K&T 14. Probably won’t see anything until this debacle is straightened out. Right now, the main focus is getting the line between Barthell and blue Heron completely rebuilt with a strong solid road bed. I was there earlier this past year and I asked a couple questions about it.

With all the facts at issue here I think it is highly unlikely that the K&T folks will see anything out of this debacle.

They are an unsecured creditor and from the facts here, ( now in the public domain via the bankruptcy court) the unsecured creditors will get nothing as the secured creditors have claims far greater than the sale of assets will cover.

The K&T folks can attempt to go after John Rimmasch personally to try and collect but the odds of success there I would guess are slim??

Sad story all around. Ross Rowland