§746 Certificates of value

Summary

When the Corporation must give certain securities to the special court, the Association must give matching certificates of value to that court on the same day. The Secretary guarantees payment of those certificates. That guarantee is a full U.S. government obligation and is binding, except if there was a mutual factual mistake or if the holder or the person who transferred rail property committed fraud or lied in a way that mattered. A separate series of certificates is made for each railroad in reorganization and for each person leased, operated, or controlled by that railroad who transfers rail property. The number of certificates in a series equals the number of shares of series B preferred stock the Corporation must deposit, and they are given out at the same time and in the same amounts. Certificates can be redeemed on December 31, 1987, or sooner if the Association’s Board and Finance Committee agree. The cash paid for each certificate equals its base value on the redemption date minus the fair market value of the related series B preferred stock and related common stock plus any dividends already paid, and minus any payments the transferor already received from sales or leases, divided among that transferor’s certificates. Each certificate counts as one share of series B preferred stock (adjusted for splits) and a fraction of the common stock based on how much common stock the transferor received divided by the number of certificates. The base value is the transferor’s net liquidation value as set by the special court, minus other benefits, plus any court-ordered adjustment for unconstitutional losses, plus interest from transfer to redemption compounded annually at 8%, then divided by the number of certificates. “Rail properties” also includes rights tied to employee benefit plans, with their value set after accounting for obligations moved to the Corporation. Fair market value of the stocks is based on the Association’s rules using the 120 trading-day average that ends not less than 20 and not more than 40 trading days before redemption; if no market exists, three valuation experts (one named by the Association, one by the directors elected by holders, and a third chosen by those two) decide by majority. The Secretary may receive whatever money is needed from Congress to pay the U.S. obligations created by these guarantees.