Commuter rail company files for bankruptcy

Boston Surface Railroad, which proposes passenger train service in city, says move is re-organization

WOONSOC.ET Embroiled in a tenancy dispute with the state, the fledgling Boston Surface Railroad Company has voluntarily filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code in the federal District of New Hampshire, where it also maintains an office.

BSRC founder and president Vincent J. Bono said the company’s intention is not to liquidate, however, but to reorganize and remain in business by forcing the state Department of Transportation to honor its lease with the commuter-rail startup, headquartered in One Depot Square. RIDOT is pushing for the eviction of BSRC from the train depot opposite City Hall, contending its tenant is in default of its rent, but the bankruptcy petition, filed Oct. 6, freezes legal action pending in all other jurisdictions.

“Our principal goal of providing efficient, cost-effective commuter rail service between Worcester, MA and Woonsocket and Providence, RI, in 2020 remains our top priority, with e press motor coach service beginning in Spring 2020,” Bono said in a prepared statement. “In order to maintain our timeline, it is critical that the State of Rhode Island continues to honor our e isting 15-year lease at the historic Woonsocket train station.”

Bono added, “We have filed for Chapter 11 reorganization not to alleviate debt, but to ensure the viability of our long-term lease. Woonsocket is a pivotal location for our Worcester-Providence rail service and we hope to move forward as quickly and efficiently as possible.”

Similarly, the lawyer who filed the 41-page bankruptcy petition told The Call Tuesday that all of the creditors many with local ties will be paid, regardless of whether they are secured or unsecured.

The petition lists about $1.86 million in creditor claims, including some $636,300 in the form of secured, bank-issued bonds that were sold to investors in BSRC. The papers list 24 different entities or individuals who invested anywhere from a few thousands dollars to $250,000 in the company. Many

are out-of-towners with unfamiliar names, but a few are local residents, including some who are well-known in business circles.

River Falls Restaurant owner Gary Fernandes, for example, is a secured bondholder in the amount of $15,000. Others include Oscar Hancock of American Beauty Signworks ($20,000); Roland Desjarlais, a principal of Brothers Disposal in Cumberland ($20,000); and Andrew Noyes, president of Rhode Island Dolls, an exotic dancers club at 579 Front St. ($5,000).

In any bankruptcy proceeding, secured creditors are not necessarily guaranteed reimbursement; presumably,

however, they’re first in line to be repaid with the remaining proceeds of a reorganization.

In addition to the secured creditors, the petition lists 26 non-secured creditors, some of whom are also familiar in the local area, including School Committeewoman Rebecca Capwell, a political ally and neighbor of Mayor Lisa Baldelli-Hunt, one of BSRC’s most ardent champions. Capwell is owed $10,000, according to the legal papers.

Another unsecured creditor, in the amount of $65,000, is Kun Realty of Cumberland. That’s roughly the amount of a Superior Court legal judgment entered in Kun’s favor against BSRC, in September, in an unrelated lawsuit alleging the company defaulted on mortgage payments for a parcel on Arnold Street that it had purchased.

The petition also says

BSRC is in possession of about $166,815 in hard assets, including office equipment, vehicles, a train car and less than $2,000 in savings and checking in Bono’s name.

Bono is also listed as the largest unsecured creditor, with about $712,500 invested in BSRC.

“We’re preparing to file a plan of reorganization in which all the creditors will be paid in full,” said Nashua, N.H., lawyer Peter N. Tamposi, who filed the bankruptcy petition. “Even the unsecured creditors will be paid in full.”

Tamposi said the petition could have been filed in any jurisdiction where BSRC maintains an office.

The petition was appended to an advisory motion filed by Woonsocket lawyer Mark Smith in connection with the RIDOT tenancy dispute on Friday in Rhode Island Superior Court, according to the

judiciary’s database.

“Please take notice,” the motion says, “that pursuant to (the Bankruptcy Code), the filing of the voluntary petition operates as a stay, applicable to...a judicial, administrative, or other action or proceeding against the Debtor that was or could have been commenced before the commencement of the case under the Bankruptcy Code.”

The eviction dispute had been scheduled for trial the same day Smith filed the motion.

The state transportation agency filed eviction proceedings against BSRC in April, contending its tenant was in breach of its lease on One Depot Square in several ways, including non-payment of rent. RIDOT also claimed that Bono, in violation of the lease, had resided in One Depot Square, had allowed others to reside in it, made unauthorized renovations to the building and engaged in unlawful subtenancies. At the time, BSRC claimed it withheld rent because RIDOT was in default of its obligation to keep the building in good repair, citing a long-dysfunctional HVAC system.

As the bankruptcy papers indicate, Tamposi said BSRC has now made good on all back rent owed to RIDOT – about $13,000 in all, including a check for $10,000 that RIDOT has apparently not cashed.

“We tendered payment,” Tamposi said. “My belief is they might not have cashed the check, for reasons which are unclear to me. If they refused the check, that’s not our problem. They can’t unlaw

fully evict us if we’re current on our lease.”

Tamposi characterized the eviction proceedings as “a heavily political move by RIDOT – they were trying to effectively break our lease assuming we wouldn’t be able to raise the capital to prevent it.”

RIDOT had no immediate comment on the bankruptcy proceedings. But in an earlier interview, RIDOT said its goal was to take full control of One Depot Square and relocate some of its own staff there. RIDOT said it was also interested in maintaining a relationship with the Polar Express, a popular yuletide train ride run as a fundraiser by the Blackstone Valley Tourism Council.

Founded in 2012 as the “Jet Blue” of commuter rail, BSRC aims to established a three-state commuter rail loop stretching from Providence to Bedford, N.H., offering riders affordable fares and, in the local area, an alternative to the headache-inducing commute of antiquated Route 146. The company was originally founded as a smaller, Worcester-Woonsocket-Providence service provider, but later expanded. It’s inked provisional agreements with four cities, including Woonsocket, allowing them to take a percentage of possible federal grants for local infrastructure improvements.

Tamposi said the New Hampshire Bankruptcy Court has not yet scheduled a hearing on the petition.