WATCO Makes Investment in GLC

[That Guy]

WATCO has made a preferred equity investment in Federated Capital Holdings, LLC which is the holdings company of the GLC.

PITTSBURG, KANSAS, November 18, 2013 – Watco Transportation Services, L.L.C. (WTS), a Kansas limited liability company and subsidiary of Watco Companies, L.L.C., has reached a definitive agreement to make a preferred equity investment in Federated Capital Holdings, LLC (FCH), a Michigan limited liability company. FCH’s holdings include the Great Lakes Central Railroad Inc. (GLCR), a 400 mile regional railroad operating entirely in the state of Michigan and Federated Railcars, Inc. (FRI), owner of a fleet of refurbished passenger cars.

“This partnership between two entrepreneurial companies will help insure the long-term success of local rail service in Michigan and also provides a mechanism for the continual growth and improvement of our transportation assets to help grow Michigan’s manufacturing and agricultural interests,” said Louis Ferris, FCH’s President. “We also believe that this partnership provides significant benefits to the Michigan Department of Transportation’s passenger efforts. We look forward to working with Watco’s team for years to come,” added Ferris.

The GLCR stretches from Ann Arbor, Mich., north to Cadillac with branches to Thompsonville, Traverse City, and Petoskey. The primary commodities hauled by GLCR include grain, sand, and plastic. The railroad interchanges with the Canadian National and Huron Eastern in Durand, CSXT at Anne Pere and Howell, the Ann Arbor Railroad at Ann Arbor, and the Mid-Michigan Railroad at Alma. FRI, through the GLCR’s shops in Owosso, rehabs and upgrades its passenger car fleet to be used for the Michigan Department of Transportation’s proposed “WALLY” service as well as for other potential commuter agencies.

“The Watco team is extremely proud and honored to enter into a long-term strategic partnership with the excellent team at FCH,” said WTS Chief Executive Officer Rick Webb. “We look forward to the opportunity to work with FCH to create extraordinary value for rail shippers in Michigan.”

[AARR]

The GLCR stretches from Ann Arbor, Mich., north to Cadillac with branches to Thompsonville, Traverse City, and Petoskey.

In case someone may not already know GLC does not go to Thompsonville but ends at Yuma. Yuma to Thompsonville was removed before GLC by TSBY and sold as scrap. Some might have been reused.

[GAP]

Didn't WATCO recently buy the Ann Arbor RR? Do they hope to put the pieces together again to re-make the old AA?

[AARR]

Didn't WATCO recently buy the Ann Arbor RR? Do they hope to put the pieces together again to re-make the old AA?

Yes, they started in Jan on the Toledo-AA segment. Now it looks like they are investing in the AA-Yuma segment. In addition to sand, a long-time staple, TSBY and now GLC is transferring a lot of traffic over AA including grain and plastic. Now if only someone can get that NGL plant in Kalkaska to ship by rail again

[KC]

....Now if only someone can get that NGL plant in Kalkaska to ship by rail again

and the Traverse City scrap dealer, and the Elmira cement terminal, and the Cherry Growers plant, and the Kalkaska oilfield mud, and XMAS TREES!

Kelly

[Steve B]

What percentage of Federated does WATCO now own? Or is that info proprietary?

[Saturnalia]

I think someone over there has a dream of reuniting the Annie.

Even if just on paper, the two railroads do operate on the same mainline, handling the same online customers as two companies as they would as one. In theory anyway, merging the two back together would change little but eliminating the time and such spent interchanging at Osmer.

The announcement does seem to stir the pot. Let the rumors begin!

[Sppengelly]

The merging and cooperation between Federated and WATCO is a little bit bigger than most of you may think. Yes, the same traffic would be interchange at Osmer, but interchange costs would be reduced or eliminated. Rail transportation costs increase as more railroads (particularly short lines) are added to the the routing and GLC may be able to attract more customers with reduced cost shipping and interchange via Toledo instead of the other Class I interchanges at Durand and Howell (Ann Pere).

-Sean

[Racer]

The merging and cooperation between Federated and WATCO is a little bit bigger than most of you may think. Yes, the same traffic would be interchange at Osmer, but interchange costs would be reduced or eliminated. Rail transportation costs increase as more railroads (particularly short lines) are added to the the routing and GLC may be able to attract more customers with reduced cost shipping and interchange via Toledo instead of the other Class I interchanges at Durand and Howell (Ann Pere).

-Sean

I was hoping this meant each railroad's trains/ operations would be overlapping each other. Couldn't that technically happen being state-owned trackage?

[TSB]

Does "preferred equity" mean anything to you guys?

[Todd Cline]

Jim, I'm not familiar with the term "preffered equity", So I'll not comment on that. I will say however, that it seems that maintaining 100+ miles of track for 4-to-8 cars a week seems a bit much. Even if the state is picking up the tab. I CERTAINLY don't want to see any more rail abandonments here in Michigan, and I DO applaude the DOT for keeping the northern rails intact. It DOES provide an option for long-haul trucks (provided their destination is northern Michigan). Bottom line is this... Is it really worth it? As much as I love the northern rails, I wonder if it can make economic sense. Perhaps those dollars (State dollars) should be put to use down state where there are economic benifits to be realised. Yes, I know I'm going to sound like the "BAD-GUY" with these comments, but I think it needs to be said.
Just for the record, I think Michigan should have the same rail map it had in 1950. But with shortlines running the granger branches..

How's that for conflicting wisdom? Either side of the coin DOES or DOES NOT make sense... Guess it depends on where your 401k interests are at the time......
As an aside, I see AIG is advertising on TV again... Boy, they got some balls... Do they think we forgot what happened on Wall street seven years ago????
Kind of like Adolf Hitler asking to be your buddy again, right?

Todd

[Standard Railfan]

Does "preferred equity" mean anything to you guys?

Preferred Equity means the holders of this class of stock are first in line to receive dividends and have first priority in liquidation. Often times preferred equity will pay a fixed dividend percentage which must be satisfied prior to common equity holders being paid a dividend.

More here http://www.investopedia.com/terms/p/preferredstock.asp

[Pie39]

I think someone over there has a dream of reuniting the Annie.

Even if just on paper, the two railroads do operate on the same mainline, handling the same online customers as two companies as they would as one. In theory anyway, merging the two back together would change little but eliminating the time and such spent interchanging at Osmer.

The announcement does seem to stir the pot. Let the rumors begin!

And you know...I have no problem with that theory. They have the Annie GP35s, let's dress them orange! If only I lived in Michigan, I'd like to observe for myself what unfolds

[Notch 8]

What color will they paint the Ferries ?

[Ypsi]

What color will they paint the Ferries ?

This is going to be an awesome thread SHOULD WE START A VOTE!!!!!!

[AARR]

What color will they paint the Ferries ?

This is going to be an awesome thread SHOULD WE START A VOTE!!!!!!

After the ferries ended there was a proposal to use mega-barges (rather than ferries) to ship rail cars across the lakes. IIRC the barges would have carried more than the 20ish 50' rail cars that a ferry would carry (seems like the barge would carry 40?) and use 1/4 of the crew (the typical ferry required a crew of 30-35 people). In fact several great lake docks were considered. but like so many of railroad ideas the barge concept never went past the proposal stage.

[Standard Railfan]

But the Tugboat built for the cross lake rail ferry lives on!

They just have to throw together a barge and presto, back in business.

http://www.tugboatinformation.com/tug.cfm?id=3910

[midland sub]

WATCO did what Railamerica couldn't pull off. Good for them and making this work out.

[TSB]

I give up.

[CAT345C]

I give up.

What you said. I've seen numerous accounts on facebook of people saying the GLC was bought by Watco..