By Naomi Hatch
Following an executive session Tuesday evening to hear a report from attorneys on legal action taken and negotiations relating to the acquisition of the Apache Railway Company, and to obtain legal advice regarding that acquisition, the Snowflake Town Council returned to regular session and Town Manager Paul Watson briefly summed up the acquisition.
He noted the town’s efforts to stop the closing of Catalyst’s Snowflake paper mill. Though they were not successful in that endeavor, they managed to keep the railway from being scrapped.
Snowflake officials feel that the railway is vital to the town’s economic future, and hired Brown and Brown Law Office to help. The firm filed motions and actions to try to keep the railroad from being sold as part of the mill assets and scrapped.
“The process basically culminated with an actual auction,” said Watson. “A lot of things happened before that.
“That auction was a last chance for the various bidders to give their best price for the purchase of Catalyst, including Apache Railway,” he said, noting that during that process it was made known that the community of Snowflake and Aztec Land and Cattle Company had worked with one of the bidders, and if that was the successful bidder Snowflake and Aztec would withdraw their lawsuits and claims because, “We felt we had a bidder that was genuinely interested in this community.”
Watson said that bidder was Hackman Capital Partners. “Part of their (Hackman’s) success was based on the fact that there was value given to our desire to withdraw any motions if they were successful,” said Watson. “In essence there was half a million dollars given to the process that was successful during the bidding processes.” Hackman was given until Dec. 17 to put all the pieces together to close on the sale and was then given an extension, having to close the sale by the end of December.
“So that’s when the real work began of discussions with various parties to see how we could make this concept into a reality,” said Watson, “concept, meaning negotiations between entities and various parties in-volved.
“The actual closing took place on Jan. 30, and as a part of that closing, Hackman…agreed to sell the as-sets off and the stock of Apache Railway directly to this third party in exchange for which Hackman would get a note for that portion of purchase price that was needed to cover the railway,” said Watson. “That note is approximately $6 million.” He explained that he said “approximately” because that could be adjusted. Snow-flake has approximately a year or less to put together financing to pay back the bridge financing that Hack-man paid.
“Why $6 million?” asked Watson. “The railway as an option only has a value of a million; as a scrap or liquidation, it probably has a value of around $10 million.
“In the auction process Catalyst did not say you could only bid on the railway portion based on you were going to operate, and based on that, the bid for scrappers was higher,” he explained.
“The major bidders were all operators is just not true and I have more than enough facts to back that up,” said Watson.
“Here’s where we are today,” said Watson, explaining that they have a $6 million note and will go to anyone and everyone that will listen. He said that he feels that the railway will be operating sufficiently to cover that debt and there are a number of entities that are dependent on that railway. “When they get to utilizing that railway, the revenues will be far sufficient to cover that debt,” he concluded.
Mayor Kelly Willis thanked Watson for the job he has done, noting he has been professional and served the town well, keeping his cool through all of it.
“Mr. Steve Brophy (of Aztec Land and Cattle Co.) has been an advocate for our small community and has our best interest at hand,” said the mayor, noting that Brophy has been from one end of the country to the other to push this and see that it comes to a good completion.
The mayor also thanked David Brown “who has done so much to help us putting things together,” and Town Attorney Robert Hall, who has also worked on this.
“I don’t think we realize how important it has been pushing our agenda forward,” he said.
“There’s been a lot of effort in it… more than you’ll ever know, more than you’ll ever understand,” Mayor Willis. “I want you to know that I still feel that the railroad is vital to our community and it is some-thing that we need to try to push forward, that we have something to push forward in the way of our future.”
“The mayor said I love Snowflake and my company loves Snowflake,” said Brophy. “Our future is Snowflake…We’ve been here and we’re not going anywhere.
Brophy related that Michael Hackman, CEO of Hackman Capital, read a story in the Silver Creek Herald and made the statement, “If a community works together, they almost never lose; if they don’t work together they almost always do.” He was impressed that so many were working with Snowflake to save the railway.
“We’re not subject to the whim of Catalyst, it’s at least under our control now,” said Brophy.
He acknowledged that Watson dealt with some of the most sophisticated bankruptcy lawyers and said, “Every time he’d open his mouth and speak, the right words came.”
The Snowflake Community Foundation is a non-profit organization that carries the debt and owns the stock of the Apache Railway, explained attorney David Brown. “We’ve been very careful to not have the town incur any liability.” He noted that Snowflake is unique, that no other place has land, water, natural gas and a railroad. “They are very valuable.
“We appreciate your sticking with this,” Brown told the council.
By Naomi Hatch