Fortress Sub Gives Up Oregon Shakedown

Wes Edens must be starting to wonder if he’s ever going to catch a break. It’s one thing to have a second-tier wannabe Street Nabob beating on Fortress Investment Group’s (FIG) stock, but now its RailAmerica (RRA) subsidiary has abandoned, under pressure, an attempt to extort $23 million, plus ongoing surcharges and subsidies, from the state of Oregon and various related enterprises to restore service on the Coos Bay section of its Central Oregon & Pacific Railroad.

The line closed suddenly in September 2007, allegedly because of deteriorating tunnels, leaving the Coos Bay port, in southwest Oregon, and its mostly timber shippers without rail service. Much sharp-curve steel-on-steal squealing ensued, growing only louder as RailAmerica came up with the brilliant wheeze of having anybody else pay for repairs. It then agreed to sell the line, at a so far undisclosed price, on condition that it kept control over a vital section.

All of which culminated in a six-hour Surface Transportation Board hearing, starring 48 speakers and a crowd of more than 200, in deepest Oregon last week. According to local press reports, a highlight seems to have been the dialog between board member Douglas Buttery and Paul “Boca Raton” Lundberg, a RailAmerica vice president from Boca Raton, Fla.

“Have you all figured out yet why these folks out here are so mad at your company?” asked Buttrey...

“To be quite honest with you, no, I haven’t figured that out yet,” Lundberg replied, to murmurs from the audience.

“I think I’ve figured it out,” Buttrey said.

As, it seems, had everyone and everything else in the room, up to and including the chairman’s gavel.

Railroad agrees to give up Eugene section
by John Sowell
News-Review (Roseburg, Ore.) Aug. 22 2008

RailAmerica: We'll sell all of Coos Bay line [$$]
Trains NewsWire Aug. 22 2008

Public Hearing on Coos Bay Rail Line
Surface Transportation Board press release
Aug. 15 2008

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Earlier on NakedShorts:

Every picture tells a story
Aug. 18 2008

Disclosure: FIG is a member of the NakedShorts Falling Anvil Portfolio’s watchlist.