Sunday, May 14, 2017

GLBT Chicken & Egg Arguments




This is not a “Which came first the chicken or egg” scenario.  Many times when speculation capital attempts to invest in infrastructure projects, they make this argument that they are working at a disadvantage because the industry is not letting them into their circle of friends.  Speculation capital’s argument they cannot gain financing and funding without a Certificate of Public Convenience and Necessity from a regulatory board.  Do not accept this argument from Great Lakes Basin Transportation.  GLBT has no financing, no investor funding, and no customers and this is not a chicken-egg scenario. 
This is speculation capital attempting to gain a Certificate of Public Conveniences and Necessity.  Once GLBT has a CPCN, it has a tangible asset and can go to Illinois, Wisconsin, and Indian to begin the process of eminent domain to gain the easement.  The CPCN is a huge asset.  It’s the hammer of eminent domain. 
Quote by Michael Blaszack's book.  GLBT attorney is a rail buff.
Many times regulatory boards will wash their hands of the situation and justify it’s not their job to bless the business plan as a good plan.  Unfortunately, that is exactly what speculation capital spin a CPCN to the banks and potential shareholders.  The CPCN is a huge asset of blessing a business plan.

Would BNSF go to the STB and request a CPCN without showing customers, financing, funding?

No.

If any Class 1 railroad went before the Surface Transportation Board with a Financial Application to build a railroad bypassing Chicagoland, the application would list all three in depth.  GLBT does show a schedule of anticipated traffic from all 6 Class 1 railroads which they are “confident” to be a source of income, but they have no letter from any of the existing railroads indicating intent to use GLBT.  There is no proof of their “confident” assumptions.

Does the GLBT intend to come back to the STB requesting to force the Class 1 railroads to use the proposed GLBT bypass in the name of equity and fairness?


One has to wonder if GLBT refusal to list shareholders in the company is an attempt to hide the lack of funding as “proprietary information”.  As controversial as this project is, it needs to be truly open and transparent.  Hiding behind Orders of Protection only prolongs the process. 

We as a society do have a problem with infrastructure siting taking too long.  This process lasts way to long.  The proposed Tongue River project lasted at the STB for 35 years before it was denied.  Tongue River at least had a guaranteed customer.  GLBT doesn’t even have one guaranteed customer.   

Landowners must endure the stress of the unknown when proposed projects are in limbo before regulators for what feels like perpetuity.  Landowners must delay financial decisions, including delaying potential sale of property when the siting process drags on too long.  To keep the process quick, efficient, and reduce the potential of further appeals and lawsuits, I urge the STB to deny GLBT the request of an Order of Protection.  Let’s keep this process open to the public.  Speculation Capital should not play by a different set of rules than other railroads.

GLBT, NO Financing, NO Funding, NO Customers & NO Choo-Choo




Does anyone else see Great Lakes Basin Transportation Financial Application as a train wreck?  This proposed business plan offers no balance sheet, no list of investors, no funding, no financing, and most importantly no guaranteed customers.  This company doesn't even have a choo-choo to its name.

P14 from the GLBT Financial Application to the Surface Transportation Board
Financing for the construction phase would be accomplished primarily through the issuance of debt securities.
This proposed project is a train wreck.

1.      Financing is not the same as funding.  In the Financial Application GLBT makes no indication the financing is available.  This company will be borrowing somewhere between 2 to 8 billion dollars, yet GLBT does not offer a statement from any financial institution indicating a willingness to finance the project.  How is the STB supposed to authorize a project where there is no financing available? 
  



P15 from the GLBT Financial Application to the Surface Transportation Board
Exhibit G is a pro forma income statement which shows anticipated revenues, operating costs and debt service costs in years one through five after completion of construction, assuming a financing structure of 37% equity and 63% debt.

Page 46 from the GLBT Financial Application to the Surface Transportation Board
As there are no revenues or operations, there are no current relevant balance sheets or income statements.

2.      GLBT also has no funding.  Financing is ability access to capital through borrowing with loans, but at the end of the day you have to have cold, hard cash to build Great Lakes Basin Transportation.



In the Financial Application to the STB, GLBT projects the proposed project will be constructed with loans funding 63% of the project and investment capital covering 37% of the capital required for construction and operating capital.  While GLBT claims 24 stockholders, GLBT offers no indication how many of these stockholds are offering actual cash and how many of the stockholders are providing “services”.  GLBT doesn't even want to tell the public who the investors in this project.  It is conceivable all of the existing 24 stockholders in GLBT are offering “services” in return for equity in this company. 

What is the point of a Financial Application with no actual financial numbers or statements beyond Pollyanna projections?

P52 & 52 From the GLBT Financial Application to the Surface Transportation Board
From a business standpoint, we are confident that the current traffic base of rail shipments moving through Chicago will generate sufficient revenue to adequately fund the operation and maintenance of the proposed railroad and repay its construction debt. 
                       
3.    GLBT does not offer a guarantee of a customer base from Class 1 railroads beyond “confident” assumptions.  There is no list of Class 1 railroads that have expressed a willingness to use GLBT.  At this point Union Pacific from the west and Norfolk Southern from the east have publicly state they have no intention of using this proposed railroad.  The largest railroad west of Chicago and the largest railroad east of Chicago will not use GLBT.  Strangely the GLBT Financial Applications projects weekly trains from these railroads using GLBT.
We, as a society are left with the clean up when speculation projects fail.

Conclusion
GLBT has submitted a Financial Application to the STB with no indications of the ability to raise the money to build this proposed project.

GLBT has submitted a Financial Application to the STB with no supporting documentation of stockholders ability to provide 37% of the equity capital.

GLBT has submitted a Financial Application to the STB with no statements from Class 1 railroads willing to use the project. 

No financing, no funding , and no customers, but Great Lakes Transportation expects the Surface Transportation Board to issue a Certificate of Public Convenience and Necessity because they filled out the every portion Financial Application.   We, as a society, are willing to open our communities to companies doing “dirty jobs” when they are legitimate companies with more than just a business plan of promises.  All too often our communities have accepted a slick sales pitch, promising jobs, and promises of tax income.  All too often these salesmen have left with the project a mess, complete with empty promises, and a scar left on our communities. 

With no financing, funding, and no customers, GLBT gives every indication if constructed, it will be a failure and a 23,000 acre scar upon our land.