On February 26, 2007, the FRA rejected a proposed $2.3 billion loan to DM&E. The railroad never did find the money to do the expansion into the Powder River Basin of Wyoming to haul coal. Eventually the railroad and it’s sister line the IC&E were sold to CP. Later selling to Genesee* and Wyoming Railroad company. It operates now as the Rapid City, Pierre and Eastern Railroad.
Thinking over what’s happened in the world in the last 13 years, where would DM&E be now, if it had gotten the $2.3 billion FRA loan?
*How is Genesee pronounced? juh-NIECE? or jen-UH-see?
Had things been different, DM&E might have still been swallowed-up by one of the Class 1’s. Nobody at the time thought the coal market would crash like it did. The pressures of somebody getting direct access into the PRB might have created some strange bedfellows, but we may never know what was actually going on behind the scenes. The engineering side of the equation was very competent, the operating side a little less so.
The stuff in the green bottles and cans, not to be confuzed with Rolling Rock is still out there. Shoenling Little Kings is still out there as well from the bad old days. Folks in the east half of the country probably recognize the name. Kinda funny to see how Trader Joes and others pass off eastern beer as something special(?)…never were what is passed-off as microbreweries today.
(Does Electroliner remember seeing Arte Johnson’s commercials for Hudepohl?)
Maybe? DM&E and CP were pretty tight before the coal idea came up. When the railroad was sold, the deal was something like $1.8 billion, plus another $1 billion if the coal line got built later.
Ah, yes. Genny Cream Ale. Some folks love, others not so much. It’s OK.
A throwback to one of their advertisements, tied together with what would be horrible medical advice today, making it all, of course, a joke:
A woman went to the doctor with signs and symptoms of pregnancy. After a thorough examination, the doctor confirmed that she was, indeed, pregnant. He also advised her to drink Genesee beer.
This struck her as curious, so she inquired further, to which the doc replied, (sing along if you know the tune) “Genny is the one beer to have when you’re having more than one…”
Groan as appropriate.
Now, back to trains.
Edit - I had the beer wrong - it was Schaeffer - but the joke is still worth a chuckle…
To tell you the truth, we drank that exclusively for about 2 1/2 years purely because it was the cheapest. Very cheap, because we were basically destitute. (I was working as a darkroom slave, and my wife was going to school at Syracuse U.) I think we were paying about $8 for a case of 24. Then one day we decided we couldn’t stomach another can of it. After that we switched to Labatt’s Blue.
Nowadays I drink pretty much only dark beer (try Nitro milk stout [Y]), so I’d probably no longer like the Labatt’s either. But it was a step up from the Genny Cream.
You might find the following reading of interest. The section titled “Loan Costs” prescribes a combination of factors to assure that the loans function at zero cost to the government. A combination of “Credit Risk Premium” paid by the borrower, as well as collateral to guarantee the loan.
So, I guess your answer is in there.
Also interesting is the table listing names and amounts of entities to have already taken advantage of the program. D,M,&E having already been to the well twice.
I saw that. Amtrak has borrowed roughly $3.5 billion and they’ve paid back about $1 billion. It makes me jittery to think that a government agency had to borrow money through a government agency. They had to pay an extra fee that puts money into the kitty for entities that can’t repay their loans through the government agency. To be fair, Amtrak says they are on schedule to pay the money back.
At this point, I’m really wondering how the determination of value for the collateral is made? Market value at present, or some formula based upon what the eventual value might be after rehabilitation has been completed?
If the latter, it sure seems like it opens the door for creative minds to prosper, with clandestine opportunity. I don’t know if you’ve followed some of the hustles put together by unscrupulous charter school operators…but…oh well, I’m sure you get my drift. [}:)]
Yes, this is how I read it as well. CP wanted DM&E for the same reason IC wanted back it’s Chicago to Omaha line. I am not sure of the specifics but it had something to do with hauling grain and crops and being able to charge more with a line into prairie country that originates the traffic. With the DM&E line I believe CP gets better rates on some originating seasonal crop traffic and can haul it longer distance. Probably also institute those unit train limits and load out areas for unit trains as well.
In other words, looks like the Class I’s abandoned just a little too much of their former granger lines and are now learning of the full revenue loss of doing so.
Kind of interesting as I wonder if CP would have wanted to hold onto the former Milwaukee Road to Omaha as well if the tracks were not gone now.
I think it was more to get back to Kansas City. All though it’s conventional wisdom for railfans that the coal line was the big reason, I think the projected coal line was the least of the CP’s considerations.