Re: EL Fate (was RE: (erielack) Alco Farewell / Economy Changes)

[Tim Stuy <njmidland_@_verizon.net>]

To bring this back to the EL, the estate of the EL eventually came out of
bankruptcy as Erie Lackawanna, Inc.  The initial distribution of stock was
to holders of the various bonds that had defaulted when EL declared
bankruptcy in 1972 (the stock was deemed worthless to DERECO and had no
claims on the estate).  There were a lot of different bonds from both the
Erie and the DL&W.  Some were mortgage and some were income (these only paid
if the railroad made income).  As Schuyler mentioned, these bonds were
selling typically for 10 cents on the dollar of face value in the late 70's
and early 80's.  I bought a couple of thousand dollars worth of Morris &
Essex bonds for something like 25 cents on the dollar.  EL, Inc. owned the
real estate left behind by Conrail, which included most of the mainline
across Ohio and Indiana as well as branches in the east like the Honesdale
Branch that was excluded from Conrail.  There were other parcels
everywhere.  The big money was the cash that the government paid for the
"seized" assets.  The downside was various asbestos lawsuits and a fairly
complicated claim by the IRS.  Over the years EL Inc. would make cash
distributions when money came in or a lawsuit/IRS claim were settled.  I
don't have the numbers in front of me but the payout was spectacular,
especially for those who bought the defaulted bonds at the bottom.  I only
ended up with 12 shares based on the bonds I had.

I have run across a few people who made their fortunes buying into all of
the bankrupt Northeast Railroads as the story played out the same.
Basically Conrail saved all of the investors as had the government not paid
essentially full price for these companies then each one would have slowly
drained their assets going through abandonment proceedings while still
deferring maintenance.  Maybe the Staggers act 4 years later would have
saved them but who know.

One last RR bankruptcy fling happened in the early 80's with the Rock Island
and Milwaukee.  I dabbled a little with the Milwaukee but never enough to
retire!

Tim

On Tue, Dec 14, 2010 at 10:45 PM, Schuyler Larrabee <
schuyler.larrabee_@_verizon.net> wrote:

> A few years ago, I told my investment guy (I still speak to him, in spite
> of
> what's happened with my "investments" the last few years!) that I wanted to
> put about 10% of my stash into railroad stocks, specifically UP.  He went
> back into the bullpen and came back saying that they couldn't in all
> honesty
> recommend that I do that, that there was no future in railroad stocks.
>
> About two years later he admitted it had been bad advice, as I would have
> gained, I think, somewhere around 35%.
>
> SGL
>
> > I was too late when I wanted to have my parents buy EL stock.  I still
> > remember the reaction of my parent's stockbroker when I wanted to buy one
> > share of stock in the NYS&W!  I did own stock in Delaware Otsego and Erie
> > Lackawanna Inc. after Conrail but it wasn't quite the same (they didn't
> go
> > broke!).
> >
> > Tim
> >
> >
>


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