QUOTE: Originally posted by kenneo The main reason that consolodations are not now done via bankruptcy is that there are some very powerful stockholders (see pension funds, mutual funds and such like organizations) that won't stand for their investment to go to $Zero. The Rock was the last road to go "the old way" if I remember correctly. I think the Milwaukee Road was a combination of both methods starting with partial abandonment. As an example of how bankruptcy can creat an empire, see the early history of the Great Northern. J J Hill bought for almost nothing the Red River of the North line (can't remember the name of it) that ran from the Twin Cities to Winapeg. If you had Hill's skills and vision, you could create an empire out of the net worth of a General Store, just as Hill did.
QUOTE: Originally posted by kenneo Gabe and Sansouci The SP was sold because the stockholder(s) would have lost litterly everything had there not been a sale. The Santa Fe - BN deal just moved things along faster. Actually, if you look at the documents and who ended up running the UP, what you will see is that, leagally, the UP purchased the SP. But the SP has ended up owning the UP in that the major stockholder of the SP now owns 1/3 of the UP stock. The DRGW had purchased the SP after the UP took over the WP, but kept the SP name for marketing reasons. So, in reality, the SP became a fallen flag in the mid 1980's. Go figure.
QUOTE: Originally posted by CSSHEGEWISCH Bankruptcy would be a slow way of effecting consolidation. The Rock Island entered bankruptcy in 1974 and finally suspended operations in March, 1980. Admittedly, the Golden State Route was sold to SP/SSW during this period, but much of the remaining trackage that remained wasn't taken over by new operators for a while after service was suspended. A prime example of this situation is the Chicago-Omaha main, which didn't get picked up by Iowa Interstate until after a short period of dormancy and minimal operation by the Iowa Railroad, which didn't operate east of Bureau. Imagine how long a bankruptcy proceeding for Southern Pacific would have taken.
"We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics
QUOTE: Originally posted by gabe QUOTE: Originally posted by kenneo Gabe and Sansouci The SP was sold because the stockholder(s) would have lost litterly everything had there not been a sale. The Santa Fe - BN deal just moved things along faster. Actually, if you look at the documents and who ended up running the UP, what you will see is that, leagally, the UP purchased the SP. But the SP has ended up owning the UP in that the major stockholder of the SP now owns 1/3 of the UP stock. The DRGW had purchased the SP after the UP took over the WP, but kept the SP name for marketing reasons. So, in reality, the SP became a fallen flag in the mid 1980's. Go figure. Yes, the stockholders sold because for your reasons stated. But, UP didn't have to buy, they could have just let bankruptcy run its natural course. You might counter with, another railroad might have bought it out from under the UP and that was what the UP was trying to avoid. I doubt it. BNSF wasn't in a position to, and I doubt any of the major line sales would have got STB approval. CSX couldn't afford to and was too consumed with NS/Conrail. Finally, I don't know how good of a match NS would have made and NS was also focused on Conrail at the time. Gabe
QUOTE: Originally posted by gabe Part of the Reason the Bureau line took so long to the IAIS is what class 1 was interested in the saturated Chicago-Council Bluffs corridor? Although, I often wonder why UP didn't jump in immediately. Gabe
QUOTE: Originally posted by Mark_W._Hemphill Gabe: The only "assets" that typically obtain to a bankrupted railroad company are the right of way and a hypothetical strategic position. The employees are beaten down or gone, the track is junk, the rolling stock is junk, and the customers have moved on or been beaten down or have become disgusted with rail service. Equipment can be leased and quickly moved into place, and employees will self-relocate rapidly in search of opportunity (though the institutional history is lost), but track and customers are neither quick nor inexpensive to restore. It's not as if there are on-line factories just waiting for a white knight to throw the railroad light switch and they start pushing out product again -- they're gone, or have made other arrangements. This is exactly what happened with the UP-SP-RI fiasco: by the time the ICC approved the acquisition, it was moot; there was nothing left worthy of acquisition. And the cost to rehabilitate the wreckage was so stiff that only two large pieces (Cotton Rock and Spine Line) were picked up by Class Is. The SP never could fully pay for its incomplete rehabilitation of the Cotton Rock, and the financial burden of the Cotton Rock meant that SP couldn't spend money on things it desperately needed such as CTC on the Sunset east of El Paso, more and longer sidings west of El Paso, etc. In my experience, once a large, complex installation such as a railroad, generating station, etc., has gone without programmed maintenance for a long period (5-10 years), you'll generally find that the cost of rehabilitation is greater than demolishing and buying new. There's ample evidence of that where I work now. The short answer to your question is that it's a false economy to wait until a property enters bankruptcy before making the move to acquire. In retrospect, I think a lot of roads waited too long to seek a purchaser, and a lot of roads waited too long to purchase. I suggest the MoPac and the Frisco as two managements who were notably on top of their game and sought merger promptly, doing a great service to their equity holders, their employees, and their customers. I suggest SP, MILW, and RI as roads that waited far too late, doing a great disservice to their employees, equity holders, and customers. RI and MILW should have been seeking merger immediately after WWII -- any merger, almost, would have been better than doing nothing. SP should have sought merger with a better in the mid-60s, instead of thinking it was the better, and seeking inferiors such as WP. If you look back at the people involved, I would hold out Downing Jenks as the best western railroad CEO of the 60s and 70s. (And people wonder why MoPac management became disproportionately represented in UP-MP-WP ... .)
QUOTE: Originally posted by Mark_W._Hemphill [ The short answer to your question is that it's a false economy to wait until a property enters bankruptcy before making the move to acquire. ... I suggest SP, MILW, and RI as roads that waited far too late, doing a great disservice to their employees, equity holders, and customers. RI and MILW should have been seeking merger immediately after WWII -- any merger, almost, would have been better than doing nothing.
QUOTE: Originally posted by bobwilcox QUOTE: Originally posted by gabe QUOTE: Originally posted by kenneo Gabe and Sansouci The SP was sold because the stockholder(s) would have lost litterly everything had there not been a sale. The Santa Fe - BN deal just moved things along faster. Actually, if you look at the documents and who ended up running the UP, what you will see is that, leagally, the UP purchased the SP. But the SP has ended up owning the UP in that the major stockholder of the SP now owns 1/3 of the UP stock. The DRGW had purchased the SP after the UP took over the WP, but kept the SP name for marketing reasons. So, in reality, the SP became a fallen flag in the mid 1980's. Go figure. Yes, the stockholders sold because for your reasons stated. But, UP didn't have to buy, they could have just let bankruptcy run its natural course. You might counter with, another railroad might have bought it out from under the UP and that was what the UP was trying to avoid. I doubt it. BNSF wasn't in a position to, and I doubt any of the major line sales would have got STB approval. CSX couldn't afford to and was too consumed with NS/Conrail. Finally, I don't know how good of a match NS would have made and NS was also focused on Conrail at the time. Gabe Phil A. had at least two options. Sell to CR. CR's upper management was eager to stay in the railroad business. He also could have left the road haul business and set up a batch of switching lines.
QUOTE: Originally posted by fuzzybroken Jay, Thank you for clarifying and adding additional insight to my points. Enron was certainly the pinnacle of pinnacles of money-shifting, and not only was what it did illegal, it was just plain wrong. But Enron was certainly not the first company to do what they did! -MH http://www.geocities.com/fuzzybroken
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