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IN RE PENN CENT. TRANSP. CO.

October 20, 1972

In the Matter of PENN CENTRAL TRANSPORTATION COMPANY, Debtor. In re SALE OF PARK AVENUE PROPERTIES


The opinion of the court was delivered by: FULLAM

INTRODUCTION

The Trustees seek authorization to sell certain major real estate holdings of the Debtor located in the Park Avenue area of the City of New York, for prices totalling $ 59,549,000. Conditional or absolute objections to some or all of the proposed sales have been interposed by several interested parties, on a variety of legal and factual grounds.

 The following issues, directly or indirectly related to the proposed sales, are presented for decision:

 Issues applicable generally:

 1. Would the proposed sales, as a matter of business judgment, be in the best interests of the Debtor's estate and its reorganization?

 (a) Should the sales be approved on the assumption that the Trustees cannot or will not disaffirm existing leases?

 2. Does § 77(o) of the Bankruptcy Act empower the Court to approve the proposed sales, or must approval await the adoption of a reorganization plan?

 3. May the proposed sales be carried out without the consent of the New Haven Trustee?

 4. Are the trustees entitled to use the income from the properties for operating expenses, or must the income be sequestered, either

 (a) by reason of the rights of the New Haven trustee? or

 (b) by reason of the rights of certain indenture trustees?

 Issues applicable to properties leased from the New York and Harlem Railroad Company ("Harlem")

 5. Is the Harlem lease valid and subsisting?

 6. May the Trustees affirm the Harlem lease, or may the Harlem now terminate it instead?

 (a) If the Trustees affirm the lease, does this require present payment of the (accelerated) principal of the bonds secured by the Harlem mortgages?

 7. May the Trustees carry out the proposed sales without the consent of the Harlem?

 8. May the Trustees carry out the proposed sales without the consent of the indenture trustees of the Harlem mortgages?

 For the reasons hereinafter expressed, I have concluded that the proposed sales may lawfully be consummated at this time, that whether they should or should not be authorized is primarily a matter of business judgment, and that certain of the sales should be approved, while others should not.

 Because of the magnitude of the transactions and the complexity of the issues involved, it is necessary to set forth the facts in some detail.

 FINDINGS OF FACT

 1. The Debtor's estate includes various real estate holdings in the Borough of Manhattan, in the City of New York, commonly known as the Park Avenue Properties (the "Properties").

 2. In general, the Debtor has constructed rail facilities below the street level of these properties. The use of the subsurface rights for the Debtor's rail operations has not detrimentally affected the value or usefulness ...


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