§662 — Title 45 Railroads | U.S. Code

Summary

Railroad trustees in bankruptcy can ask the Secretary to guarantee certificates (a federal promise to back money raised) if the court agrees. The Secretary, after talking with the Board, can approve guarantees only if six written findings are made: stopping essential rail service would harm the public, stopping service is about to happen, no other practical way exists to get money for payroll and necessary expenses, the certificates need a federal guarantee to be sold, the railroad is likely to become self-supporting, and the railroad’s liquidation value gives the United States reasonable protection. Before guaranteeing anything, the Secretary (after talking with the Board) must require that certificate money be used only for payroll and expenses needed to keep essential service, that the railroad use its other revenues and sale proceeds as fully as possible for those expenses, and that the Secretary may buy or lease track rights and equipment to keep service going (money spent by the United States counts toward purchase or lease). Guaranteed certificates must be treated as an administrative expense with the highest lien and payment priority in bankruptcy, except for railroads the Secretary says are actively restructuring (including employee ownership plans). Interest must be a reasonable market rate and maturity cannot be later than 15 years from issue. The total guaranteed amount at any time cannot exceed $200,000,000. The Secretary must make rules to carry out these powers.

Title 45, §662

Railroads — Source: USLM XML via OLRC

(a)The trustees of any railroad undergoing reorganization under section 77 of the Bankruptcy Act, as amended, upon approval of the court, may apply to the Secretary for the guarantee of certificates. The Secretary, after consultation with the Board, is authorized to guarantee such certificates upon findings in writing that—

(1)cessation of essential transportation services by the railroad would endanger the public welfare;

(2)cessation of such services is imminent;

(3)there is no other practicable means of obtaining funds to meet payroll and other expenses necessary to provide such services than the issuance of such certificates;

(4)such certificates cannot be sold without a guarantee;

(5)the railroad can reasonably be expected to become self-sustaining; and

(6)the probable value of the assets of the railroad in the event of liquidation provides reasonable protection to the United States.

(b)As a condition to a guarantee, the Secretary, after consultation with the Board, shall require that:

(1)the proceeds of the sale of certificates guaranteed under this chapter, will be used solely for meeting payroll and other expenses which, if not met, would preclude continued provision of essential transportation services by the railroad;

(2)other revenues of the railroad will be used, to the fullest extent possible, for such expenses;

(3)proceeds from the sale of assets will be devoted to the fullest extent possible to the provision of essential transportation services by the railroad; and

(4)in the event of actual or threatened cessation of essential transportation services by the railroad, the Secretary shall have the option to procure by purchase or lease trackage rights over the lines of the railroad and such equipment as may be necessary to provide such services by the Secretary or his assignee, and, in the event of a default in the payment of principal or interest as provided by the certificates, the money paid or expenses incurred by the United States as a result thereof shall be deemed to have been applied to the purchase or lease price. The terms of purchase or lease shall be subject to the approval of the reorganization court and the operation over the lines shall be subject to the approval of the Board pursuant to subchapter II of chapter 113 of title 49, but in no event shall the rendition of services by the Secretary or his assignee await the outcome of proceedings before the reorganization court or the Board.

(c)The Secretary shall not guarantee any certificate under this section unless such certificate is treated as an expense of administration and receives the highest lien on the railroad’s property and priority in payment under the Bankruptcy Act, except that this subsection shall not apply to certificates guaranteed for a railroad that is actively engaged in restructuring, as defined by the Secretary. For purposes of this subsection, the term “restructuring” includes an employee ownership plan or an employee-shipper ownership plan.

(d)A certificate under this chapter shall bear interest at such per annum rate as the Secretary deems reasonable, taking into account the range of interest rates prevailing in the private market for similar loans and the risks assumed by the Federal Government; nor may its maturity date, including all extensions and renewals thereof, be later than fifteen years from the date of original issuance. The Secretary may prescribe such other terms and conditions as he deems appropriate. In each case, the Secretary shall consider the feasibility of requiring the railroad to dispose of nonrailroad assets as a condition to a guarantee.

(e)At any one time the outstanding aggregate principal amount of all certificates guaranteed under this chapter shall not exceed $200,000,000.

(f)The Secretary shall issue such rules and regulations as are appropriate to carry out the authority granted by this chapter.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The Bankruptcy Act, referred to in subsecs. (a) and (c), is act July 1, 1898, ch. 541, 30 Stat. 544, which was classified generally to former Title 11, Bankruptcy. section 77 of this Act was classified to section 205 of former Title 11. The Act was repealed effective Oct. 1, 1979, by Pub. L. 95–598, §§ 401(a), 402(a), Nov. 6, 1978, 92 Stat. 2682, section 101 of which enacted revised Title 11. For current provisions relating to railroad reorganization, see subchapter IV (§ 1161 et seq.) of chapter 11 of Title 11.

Amendments

1995—Subsec. (a). Pub. L. 104–88, § 325(2)(B), substituted “Board” for “Commission” in introductory provisions. Subsec. (b). Pub. L. 104–88 substituted “Board” for “Commission” wherever appearing and “subchapter II of chapter 113 of title 49” for “the provisions of section 5 of the Interstate Commerce Act” in par. (4). 1979—Subsec. (a). Pub. L. 96–101, § 7(a), struck out “upon a finding that the guarantee of certificates is necessary in order for a railroad which has received continued loan advances, pursuant to section 721(d)(1) of this title, to maintain rail services in the region (as such term is defined in section 702(15) of this title)” after “of this subsection” and provision requiring that Secretary not make any waiver under preceding sentence after Dec. 31, 1979. Subsec. (c). Pub. L. 96–101, § 7(b), added subsec. (c). Former subsec. (c) was repealed by Pub. L. 95–598. See 1978 Amendment note below. Subsec. (e). Pub. L. 96–101, § 7(c), substituted “$200,000,000” for “$125,000,000” and struck out provision requiring that with respect to a railroad which filed a petition for reorganization during fiscal year 1978, during period Oct. 1, 1979, through Nov. 30, 1979, certificates be issued without regard to limitations of subsec. (a) of this section and with such priority in payment as Secretary deems appropriate to secure repayment, for purpose of continuing service on railroad system at level in effect on Oct. 1, 1979. Pub. L. 96–86 provided that, with respect to a railroad which filed a petition for reorganization during fiscal year 1978, during period Oct. 1, 1979, through Nov. 30, 1979, certificates shall be issued without regard to limitations of subsec. (a) of this section and with such priority in payment as Secretary deems appropriate to secure repayment, for purpose of continuing service on railroad system at level in effect on Oct. 1, 1979. 1978—Subsec. (a). Pub. L. 95–611 inserted provision authorizing Secretary to waive requirements of paragraphs (1), (5), and (6) of subsec. (a) until Dec. 31, 1979. Subsec. (c). Pub. L. 95–598 struck out subsec. (c) which related to treatment of a certificate as an administrative expense and priority of the certificate.

Statutory Notes and Related Subsidiaries

Effective Date

of 1995 AmendmentAmendment by Pub. L. 104–88 effective Jan. 1, 1996, see section 2 of Pub. L. 104–88, set out as an

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note under section 1301 of Title 49, Transportation.

Effective Date

of 1978 AmendmentAmendment by Pub. L. 95–598 effective Oct. 1, 1979, see section 402(a) of Pub. L. 95–598, set out as an

Effective Date

note preceding section 101 of Title 11, Bankruptcy.

§662 Guarantee of Certificates

Summary

Title 45, §662

Notes & Related Subsidiaries

Editorial Notes

References in Text

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Effective Date

Effective Date

Citations & Metadata