From: Tadman
> Could we get a full explanation of the reading stock buy with the college students, and the suit following, maybe on the Reading forum? This sounds like a great story, but it's not going far on the Amtrak forum. <
[The next post in brackets is copied from this link in the Amtrak section about Amtrak's stock, including its possible value.]
http://www.railroad.net/forums/viewtopi ... 53a9ff8a49
> While past performance, especially of other companies, is no guarantee of future success, I am reminded of those dumb college kids back in 1974 who paid more than $400,000 to buy a majority interest in the Reading Company at 10 cents a share from N&W or C&O. After winning the "net depreciated value" suit with Uncle Sam, they're laughing all the way to the bank! <
In 1974, Reading was in the Bankruptcy Courts, so more than 4,000,000 shares of it had no power at that time. The railroad that sold was able to take a capital loss against income taxes.
After conveyance to ConRail, the various NorthEast railroads successfully sued the U.S. about its contention that they should be paid only "net depreciated value" or "net liquidation value". The U.S. thought that the amount should be what the debtor lines might get for scrap and distressed sale, less the cost of removal, remediation, and all the fees and value of delays to file for abandonment, as if the lines were still in profitable business, or, at least, not under the protection of the Bankruptcy Courts. The railroads pretty much convinced the appeals courts that they should be paid as if the lines that ConRail acquired were sold as going concerns, or, better yet, as valuable real estate not encumbered by a live railroad! The law that set up ConRail (4R Act?) said that ConRail's budget would only have to pay the "net liquidation value". Any additional moneys from a hypothetical suit would have to come out of some other part of the Federal budget. This extra money was enough to make Reading stock worth something, as the company paid its way out of debt and still had assets left over.
In a previous trip through the bankruptcy courts about 1890, the Philadelphia & Reading Railroad while entangled with the Philadelphia & Reading Coal & Iron Company was said to be the 2nd largest land owner in the world, after the Catholic Church. Years later, the Soviet Union and then Penn Central Transportation Company took over 2 of the top 3 places. Most of the Reading's holdings were the kind of real estate shoveled into fire boxes, that is, coal! The company had spent so much buying up everything it could throw money at, that it couldn't afford dirt to fill in flammable wooden trestles. It found something cheaper, fine coal, too small in size to burn well when shoveled into a fire box by hand. All those massive fills on the abandoned Catawissa and other Reading branches that ConRail didn't take are almost solid coal with some sticks inside and a few inches of dirt on top! It was a 20 year supply of coal so fine that it works very well in the stoker of a modern coal fired electric plant!
[fixed spelling error]
> Could we get a full explanation of the reading stock buy with the college students, and the suit following, maybe on the Reading forum? This sounds like a great story, but it's not going far on the Amtrak forum. <
[The next post in brackets is copied from this link in the Amtrak section about Amtrak's stock, including its possible value.]
http://www.railroad.net/forums/viewtopi ... 53a9ff8a49
> While past performance, especially of other companies, is no guarantee of future success, I am reminded of those dumb college kids back in 1974 who paid more than $400,000 to buy a majority interest in the Reading Company at 10 cents a share from N&W or C&O. After winning the "net depreciated value" suit with Uncle Sam, they're laughing all the way to the bank! <
In 1974, Reading was in the Bankruptcy Courts, so more than 4,000,000 shares of it had no power at that time. The railroad that sold was able to take a capital loss against income taxes.
After conveyance to ConRail, the various NorthEast railroads successfully sued the U.S. about its contention that they should be paid only "net depreciated value" or "net liquidation value". The U.S. thought that the amount should be what the debtor lines might get for scrap and distressed sale, less the cost of removal, remediation, and all the fees and value of delays to file for abandonment, as if the lines were still in profitable business, or, at least, not under the protection of the Bankruptcy Courts. The railroads pretty much convinced the appeals courts that they should be paid as if the lines that ConRail acquired were sold as going concerns, or, better yet, as valuable real estate not encumbered by a live railroad! The law that set up ConRail (4R Act?) said that ConRail's budget would only have to pay the "net liquidation value". Any additional moneys from a hypothetical suit would have to come out of some other part of the Federal budget. This extra money was enough to make Reading stock worth something, as the company paid its way out of debt and still had assets left over.
In a previous trip through the bankruptcy courts about 1890, the Philadelphia & Reading Railroad while entangled with the Philadelphia & Reading Coal & Iron Company was said to be the 2nd largest land owner in the world, after the Catholic Church. Years later, the Soviet Union and then Penn Central Transportation Company took over 2 of the top 3 places. Most of the Reading's holdings were the kind of real estate shoveled into fire boxes, that is, coal! The company had spent so much buying up everything it could throw money at, that it couldn't afford dirt to fill in flammable wooden trestles. It found something cheaper, fine coal, too small in size to burn well when shoveled into a fire box by hand. All those massive fills on the abandoned Catawissa and other Reading branches that ConRail didn't take are almost solid coal with some sticks inside and a few inches of dirt on top! It was a 20 year supply of coal so fine that it works very well in the stoker of a modern coal fired electric plant!
[fixed spelling error]
Last edited by JimBoylan on Wed Sep 20, 2006 8:06 pm, edited 1 time in total.
