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Nature of Operations
12 Months Ended
Dec. 31, 2012
Organization, Consolidation and Presentation Of Financial Statements [Abstract]  
Nature of Operations

Note 1.  Nature of Operations

 

Banyan Rail Services Inc. (“Banyan,” “we,” “our” or the “Company”) was originally organized under the laws of the Commonwealth of Massachusetts in 1985, under the name VMS Hotel Investment Trust, for the purpose of investing in mortgage loans, principally to entities affiliated with VMS Realty Partners. The Company was subsequently reorganized as a Delaware corporation in 1987 and changed its name to B.H.I.T. Inc. The Company changed its name from B.H.I.T. Inc. to Banyan Rail Services Inc. in 2010.

 

Banyan was a shell company without significant operations or sources of revenues other than interest on its investments. With a change in management in 2008, it was determined that the Company would seek acquisitions in rail related businesses. On September 4, 2009, the Company purchased 100% of the common stock of The Wood Energy Group, Inc. (“Wood Energy”). Wood Energy was engaged in the business of railroad tie reclamation and disposal, principally in the southern region.

 

Bankruptcy. On January 11, 2013, Wood Energy filed a voluntary petition for reorganization relief under the provisions of Chapter 11 of Title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court Southern District of Florida, Case No. 13 – 10688-PGH. We were not successful in arranging financing to continue to operate our business as debtors and debtors-in-possession under the jurisdiction of the Bankruptcy Court, and therefore on February 5, 2013 Wood Energy filed a motion to voluntarily convert the case to a Chapter 7 Bankruptcy. The filing of the Chapter 11 petitions triggered repayment obligations under a number of our debt instruments and agreements. As a result, all of our debt obligations became immediately payable. We believe that any efforts to enforce the payment obligations are stayed as a result of the Chapter 11 and Chapter 7 filings.

 

Appointment of Creditors Committee. The United States Trustee for the District of Florida will appoint an official committee of unsecured creditors of Wood Energy (the Creditors Committee). The Creditors Committee and its legal representatives have a right to be heard on all matters that come before the Bankruptcy Court with respect to Wood Energy. There can be no assurance that the Creditors Committee will support Wood Energy’s positions or ultimate plan of liquidation, once proposed. Disagreements between Wood Energy and the Creditors Committee could protract the bankruptcy proceedings, negatively impact Wood Energy.

 

Rejection of Executory Contracts. Under Section 365 and other relevant sections of the Bankruptcy Code, Wood Energy may assume, assign, or reject certain executory contracts and unexpired leases, including, without limitation, leases of real property, subject to the approval of the Bankruptcy Court and certain other conditions. In general, rejection of an executory contract or unexpired lease is treated as a pre-petition breach of the executory contract or unexpired lease in question and, subject to certain exceptions, relieves Wood Energy of performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach. Counterparties to such rejected contracts or leases can file claims against Wood Energy estate for such damages. Generally, the assumption of an executory contract or unexpired lease requires Wood Energy to cure most existing defaults under such executory contract or unexpired lease and provide adequate assurance of future performance.

 

Accordingly, any description of an executory contract or unexpired lease elsewhere in these Notes, including where applicable our express termination rights or a quantification of our obligations, must be read in conjunction with, and is qualified by, any overriding rejection rights we have under Section 365 of the Bankruptcy Code.

 

We expect that liabilities subject to compromise and resolution in the bankruptcy proceedings will arise in the future as a result of damage claims created by Wood Energy rejection of various executory contracts and unexpired leases. Conversely, we expect that the assumption of certain executory contracts and unexpired leases may convert liabilities shown as subject to compromise to liabilities not subject to compromise. Due to the uncertain nature of many of the potential rejection claims, the magnitude of such claims is not reasonably estimable at this time. Such claims may be material.

 

We are currently seeking to sell the assets of Wood Energy with Bankruptcy Court approval. The proceeds from the sale will be used to satisfy all or a portion of secured claims, with the remainder if any, allocated to the unsecured claims. The sale process may take considerable time and a sale price is not estimable at this time.

 

In addition, the uncertainty regarding the eventual outcome of the liquidation of Wood Energy, and the effect of other unknown adverse factors, could threaten our existence as a going concern. Continuing on a going-concern basis is dependent upon, among other things, satisfaction of the corporate guarantee for certain debt and other obligations, implementation of the reorganization plan and finding an operating business to acquire, and other factors, many of which are beyond our control.