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1970s Railroad Financing and Corporate Legal Minutiae

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    October 2014
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1970s Railroad Financing and Corporate Legal Minutiae
Posted by NW_611 on Thursday, June 22, 2006 5:12 PM
Suppose it's the 1970s and Railroad A holds a significant, controlling, or even majority interest in Railroad B, and Railroad B is on the verge of bankruptcy. Railroad A is solvent and its holding company wishes to maintain the value of its investment in Railroad B.

Can Railroad A or its holding company make an outright loan or other financial transfer to Railroad B in order to stave off its bankruptcy? The example I'm thinking of is the B&O's interests in the RDG and CNJ which reportedly became valueless as a result of the latters' bankruptcies. I didn't know if the C&O, had it been inclined to, could have bailed out the two railroads and prevent their entrance into Conrail.

Thanks!

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