explored in detail in conjunction with the Trustees' March 13, 1973 petition to terminate rail operations (Document No. 530). It was the Trustees' position at the June 1973 hearing on their termination petition that earning power adequate to support a plan of reorganization was lacking, and that additional diminution of the value of the estate from accruing administration expenses would invade the Fifth Amendment rights of the Debtor's secured creditors. Opponents of termination argued that the status quo should be preserved until the Congress completed action on the then pending Northeast rail crisis legislation, and that, in any event, the Court was without power to order termination of rail operations. In view of the imminent prospect of legislation, disposition of the Trustees' petition was deferred.
The findings made herein are based on the records of the June 1973 and April 1974 hearings. Although it is to be hoped that these findings will expedite further proceedings in this case, no ultimate finding or conclusion pertaining to the Trustees' petition to terminate is now being made. Rather, the Trustees' termination petition will be considered in conjunction with the hearing required by the second sentence of § 207(b) of the Act.
The issue to be considered now is whether the Debtor is reorganizable within the meaning of § 207(b). At the hearing, only the Commonwealth of Pennsylvania urged an affirmative answer. But the record simply does not support the Commonwealth's contention that the Debtor can be reorganized as an independent operating carrier. Moreover, reorganization through absorption into the Penn Central is less than realistic, as is the suggested combination of some of the smaller bankrupt carriers to form the so-called Mid-Atlantic Railroad (see Finding 51). This is particularly true since both the Penn Central and the Reading have been found not reorganizable under the § 207(b) criterion, and, therefore, at least as of this date, these carriers will be reorganized under the Act.
Certain legal issues which were raised in the Penn Central § 207(b) proceeding have also been raised here. The discussion of these issues in Parts I and II of the Memorandum and Order No. 1543 in the Penn Central proceedings is incorporated herein by reference.
FINDINGS OF FACT
1. The Lehigh Valley Railroad Company (hereinafter LV) is a Pennsylvania corporation with its executive offices in Bethlehem, Pennsylvania.
2. A petition for reorganization under § 77 of the Bankruptcy Act was filed by LV and approved by this Court on July 24, 1970.
3. The LV had previously obtained relief from pressing financial difficulties under the Bankruptcy Act in 1939 and under § 20b of the Interstate Commerce Act in 1949. Both proceedings resulted in substantial modification of LV's debt structure.
4. Penn Central Transportation Company owns 97% Of the stock of LV.
5. Railroad operations are conducted by the LV in the States of New Jersey, New York and Pennsylvania. The main line extends from Buffalo, New York to Jersey City, New Jersey, via Pennsylvania. Significant branch lines serve various areas in proximity to the main line service.
6. More specifically, the main line originates in Buffalo, New York; runs directly east to Geneva, New York; then in a southwesterly direction to Van Etten, New York, where the main line crosses the Pennsylvania border at Sayre, Pennsylvania; then down through Pennsylvania where the main line crosses into New Jersey at Phillipsburg; and thereafter the line runs in a generally northeasterly direction through New Jersey to Newark and Jersey City. The main line described above accounts for 442.6 miles of the LV's total of 972 miles of track.
7. LV interchanges with other carriers at the following locations: In New Jersey: Jersey City, Oak Island, Newark, Perth Amboy, Manville and Phillipsburg; in Pennsylvania: Bethlehem, Allentown, Northampton, Palmerton, DuPont and Wilkes-Barre, and Croxton; and in New York: Geneva, Waverly, Oswego, P & L Junction, Buffalo, and Suspension Bridge. Of the 2,698 persons employed by the LV, approximately 451 are employed in New Jersey, 1797 in Pennsylvania, and 390 in New York.
8. LV's operating plant (tracks, signals, switches and associated facilities) is of high quality. Few railroads have as much heavy rail, new ties and heated switches per mile as the LV.
9. Although the physical plant of the LV has been maintained to high standards during reorganization, nevertheless the plant was in worse condition in June of 1973 than it was on July 24, 1970, the date LV's petition was filed.
10. LV's freight car and power equipment ownership and lease arrangements as of December 31, 1973 are reflected in the following chart:
FREIGHT OWNED LEASED TOTAL
Refrig. 92 9 101
Hopper 60 0 60
Covered Hopper 478 177 655
Gondola 976 284 1260
Box 961 832 1793
Flat 52 2 54
Misc. 1 3 4
Total 2625 1307 3932
Caboose 97 0 97
Misc. 228 0 228
Road 41 30 71
Switchers 78 0 78
Total 119 30 149
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