§746 Certificates of Value

Summary

When the Corporation must put certain securities into the special court under section 743(a)(1), the Association must also put matching certificates of value into that court. The Secretary guarantees payment on those certificates. That guarantee is backed by the United States and can only be challenged for a mutual mistake of fact, fraud, or a serious false statement by the certificate holder or the transferor of the rail property. Each railroad transferor gets its own series of certificates, in the same numbers and at the same time that the Corporation’s series B preferred stock and any common stock are given out. All certificates are to be redeemed on December 31, 1987, unless redeemed earlier by the Association’s Board and Finance Committee. Redemption pays cash equal to the certificate’s base value on that date minus (A) the fair market value of the one series B preferred share and the applicable portion of common stock and any cash dividends already paid on them, and (B) any cash paid to the transferor from sales or leases of the transferred properties divided by the number of certificates given to that transferor. Base value is set by the special court from the transferor’s net liquidation value under section 743(b)(1), minus other benefits, plus any court-allowed compensable erosion, plus interest from transfer date to redemption date at 8% compounded yearly, then divided by the number of certificates in the series. Fair market value of stock is set by Association rules using a 120-trading-day average ending 20–40 trading days before redemption, or by three valuation experts if no market exists. The law allows the Secretary to get whatever money is needed from Congress to pay these guarantees. Definitions: Rail properties — includes rights for employee benefit plans transferred under section 743(b)(6). Net liquidation value — the amount the special court finds the transferor is entitled to under section 743(b)(1).