Going Concern Value
When valuing a railroad, it is important to know not only the past performance of that enterprise but also the railroad’s growth potential in the future. A standard valuation metric that encompasses these issues is a Going Concern Valuation (GCV). A GCV is an important tool in the valuation of railroad operations, reflecting past and future traffic volumes, revenues as well as operating and maintenance performance. RLBA is a leading provider of GCVs and has assisted numerous private and public sector clients in determining the present value of various railroad systems and component lines.
Select Project Descriptions:
BANK OF AMERICA:
RLBA analyzed two short line railroads in Oklahoma and Idaho as part of a refinancing package sought by WATCO Companies, Inc., a leading short line railroad holding company. RLBA undertook physical inspections of existing property conditions; proposed track maintenance plans; analyzed historical data and projected future financial performance, which were utilized to develop a going concern valuation of each railroad.
CONFIDENTIAL SHORT LINE HOLDING COMPANY:
RLBA was engaged by to perform a going concern valuation (GCV) of a business enterprise,consisting primarily of five short line railroads. This valuation was performed to allow a private capital company shareholder to sell its portion of the railroad back to the majority shareholder. Work included:
- traveling to the client’s headquarters and interviewing key staff members;
- reviewing all detailed financial statements;
- performing a detailed discounted cash flow (DCF) valuation based on the relationship between past earnings and future growth potential; and
- researching and comparing the holding company to other recent transactions in the industry to provide the minority shareholder a benchmark from which to compare the DCF valuation.
The final product was a detailed written report.
APACHE RAILWAY COMPANY (APA):
RLBA was retained by the APA to complete a Financial Feasibility Report as part of a larger loan application submitted to the USDA under its Rural Development Loan Program. Having just lost a large portion of its railroad traffic, the railroad management decided to increase its ability to store, clean, inspect and repair railcars. RLBA was brought in to analyze the financials of the company, inspect the railcar repair facility and capabilities and interview BNSF representatives about the likelihood of prospective demands for equipment-related APA services that would increase APA’s going concern value.
RAILROAD DEVELOPMENT CORPORATION:
This international railroad holding company engaged RLBA twice over several years to value the Iowa Interstate Railroad, Ltd. RLBA determined the going concern value of the carrier based on its assessment of the carrier’s ability to generate free cash flows. After obtaining engineering, traffic and revenue, operating and financial data, RLBA experts conducted detailed analyses and forecast future financial performance.