09/04/2013 03:53 EDT | Updated 11/04/2013 05:12 EST

Quebec court grants MM&A railway more time to meet creditors

The railway company involved in the Lac-Mégantic, Que., train disaster has been granted an extension of its bankruptcy protection until Oct. 9 in order to meet with its creditors and carry on negotiations with potential buyers.

Montreal, Maine & Atlantic Railway sought bankruptcy protection both in Canada and the U.S. on Aug. 7 — one month and a day after a runaway train carrying crude oil derailed and exploded, killing 47 people.

Documents filed in Quebec Superior Court show the troubled railway owes its creditors about $90 million.

The documents show the company has some $18 million in assets in Canada, in addition to an insurance policy for $25 million U.S. to cover evacuation, fire suppression, pollution cleanup, bodily injury and property damage.

Victims have filed class action lawsuits in Quebec and the U.S., and the Quebec government is demanding the company pay for the disaster cleanup. By MM&A's own estimates, the cleanup costs alone could exceed $200 million.

MM&A seeking buyer

Lawyers for MM&A appeared in Quebec Superior Court in Sherbrooke on Wednesday, asking Justice Gaétan Dumas for more time to reach agreements with creditors and also to find a buyer for the beleaguered railway company.

They explained the railway wants to continue operating in order to increase its value and to carry out the process of selling the company.

The lawyers estimate they need four months to conclude an agreement. They said they're seeking to maximize the company's sale value in order to repay creditors.

In August, the name of J.D. Irving Ltd. came up as a potential buyer for MM&A. Mary Keith, a vice-president with J.D. Irving Ltd., said at that time its NB&M Railways unit was assessing its options, but had not made any offer for the railway.