Derailed by Bankruptcy: Life after the Reading Railroad

158 Pages·2015·8.28 MB·English

by  Howard H. Lewis, John Spychalski

Railroads Past and Present
George M. Smerk and H. Roger Grant, editors
A list of books in the series appears at the end of this volume.

This book is a publication of Manufactured in the
United States of America
Indiana University Press
Office of Scholarly Publishing Library of Congress
Herman B Wells Library 350 Cataloging-in-Publication Data
1320 East 10th Street
Bloomington, Indiana 47405 USA Lewis, Howard H., [date]
Derailed by bankruptcy : life after the
iupress.indiana.edu Reading Railroad / Howard H. Lewis.
pages cm. — (Railroads
© 2015 by Howard H. Lewis past and present)
All rights reserved Includes bibliographical references
ISBN 978-0-253-01866-3 (cl : alk. paper)
No part of this book may be reproduced — ISBN 978-0-253-01871-7 (eb) 1. Reading
or utilized in any form or by any means, Company. 2. Railroads—United States—
electronic or mechanical, including Finance. 3. Railroads—United States
photocopying and recording, or by any —Management. 4. Bankruptcy—United
information storage and retrieval system, States. 5. Railroads and state—United
without permission in writing from the States. I. Title.
publisher. The Association of American HE2791.R27 L49 2016
University Presses’ Resolution on 385.06'57481—dc23
Permissions constitutes the only excep- 2015014883
tion to this prohibition.
The paper used in this publication
meets the minimum requirements of
the American National Standard for
Information Sciences–Permanence of
Paper for Printed Library Materials,
ANSI Z39.48–1992. 1 2 3 4 5 20 19 18 17 16 15
To my family, my wife and children who bore with me
while I did the work which is the subject of this book.

CON T EN T S
· Foreword by John C. Spychalski ix
· List of Abbreviations xiii
· List of Important Names xv
· Introduction 1
1 The Age of Innocence 4
2 The Gathering Storm 18
3 A Time of Waiting 27
4 The Beginning 31
5 The Plot Thickens 42
6 Fear and Exhaustion 60
7 Detailed Case Preparation 68
8 The Times That Try Men’s Souls 77
9 The Rail Use Case: Ours and the Government’s 85
10 The Government’s Case 94
11 End Game 101
· Epilogue 123
· Notes 133
FORE WORD
Financial failure enveloped most of the rail network in the northeastern
United States and adjacent territory during the first half of the 1970s. By
1973, seven companies operating a total of 25,160 route miles of line in
this area were conducting business under bankruptcy law protection.
Historically, most railroads that suffered bankruptcy were returned to
solvency by so-called income-based reorganizations that reduced the
claims of security holders to levels that could be sustained by existing
and estimated future levels of revenue. However, the situation in 1973
was different. By then it had become apparent that the existing and fore-
seeable earnings of most if not all of the seven bankrupt companies had
fallen too low to support a reorganized structure of debt and equity se-
curities of any magnitude. Consequently, liquidation of the companies’
assets and termination of most of the rail service in the Northeast be-
came a real threat, thus posing the specter of serious collateral negative
economic consequences, locally, regionally, and nationally.
This grim scene sets the stage for attorney Howard H. Lewis’s au-
tobiographical portrayal of his involvement with the bankruptcy pro-
ceedings of the Reading Company.1 As operator of 1,149 route miles of
line comprising 4.5 percent of the aforementioned total of 25,160 miles,
the Reading ranked third in size among its bankrupt counterparts. Al-
though dwarfed by the 19,300-mile Penn Central Transportation Com-
pany, largest of the bankrupt carriers, the Reading served customers for
ix