post-reorganization interline claims of Penn Central against Lehigh Valley are administration claims, and should be paid on a current basis. The Penn Central Trustees have disavowed any intention of insisting upon immediate payment of the $14 million accrued to date. The present question thus concerns the amounts which will hereafter accrue.
The Lehigh Valley Trustees have convincingly demonstrated that, if required to pay Penn Central's interlines on a current basis, they will run out of cash in six months' time. However, it is also a matter of common knowledge to all concerned that the Penn Central, too, is suffering from a shortage of cash. On February 19, 1974, in the Penn Central proceedings, the Trustees petitioned for authority, on an emergency basis, to obtain approximately $10.8 million pursuant to the Regional Rail Reorganization Act of 1973, in order to avoid defaulting on equipment obligations; and the Penn Central Trustees have predicted a further cash shortfall of approximately $20 million in August of 1974.
Section 213 of the Regional Rail Reorganization Act of 1973 authorizes the Secretary of Transportation to make cash grants to railroads in reorganization, to the extent necessary to enable them to continue to provide essential rail service, pending completion of the reorganization and restructuring procedures contemplated by that statute. I recognize that other litigation is now pending, challenging the constitutionality of that statute, and that, in any event, there must be further proceedings to determine whether either or both of these railroads will be reorganized pursuant to the statute. No matter what may be the final outcome of these issues, it is self-evident that, if these railroads are to continue in operation, there must be an infusion of cash sufficient to enable them to do so. And I believe that the true picture for both railroads should be available for evaluation in that connection. The true cash picture of the Penn Central should not be artificially worsened, nor should the true cash picture of the Lehigh Valley be artificially improved, by further deferrals of the Lehigh Valley interline obligations.
In view of the conclusions expressed above, the question of the status of the proposed settlement agreement is now moot.
ORDER NO. 226
And now, this 20th day of February, 1974, it is Ordered:
1. That the Trustees of the Lehigh Valley Railroad Company shall promptly pay to the Trustees of the Penn Central Transportation Company the amount of the interline balance due and owing to the latter for the month of January 1974, and shall hereafter pay such interline accounts as they accrue.
2. That the unpaid balances of all interline accounts for the period from and after July 31, 1970, are hereby declared to be, and shall be treated as, administration claims against the Lehigh Valley estate.
3. The Trustees of the Lehigh Valley Railroad Company are directed to apply promptly for financial assistance pursuant to § 213 of the Regional Rail Reorganization Act of 1973, and to submit to this Court for approval whatever arrangements may be proposed for such assistance.