I was watching Operation Repo last night and it made me wonder what happenes if a company purchases a railcar or even a locomotive and defaults on it. How does one reposes something like this?
There are some great historical (and hysterical) stories on this topic. Basically it usually involves court orders, injunctions, et al. The old Delaware and Eastern had steam locomotives chained and locked to the rails once in East Branch, NY, for instance, slipped there under the cloak of night!
I owe you one, man (see “Battery-Electic Locomotive” thread), so here it is, greatly simplified:
It rarely gets that far. There’s a special section in the bankruptcy law that exempts railroad rolling stock (and airplanes) from the usual “automatic stay” or ‘hold’ on such repo’s, if they’re behind on the payments. Thus, the lender can move right ahead under the terms of the loan and order the railroad to deliver the collateral rolling stock to a certain point for sale, storage, interchange, etc. The bankruptcy trustee and judge are therefore supposed to cooperate with that, so it’s even easier than most such actions where the local county sheriff goes out and ‘levies’ on or serves notice, ‘seizes’ the collateral, and takes control of it to deliver to the lender, etc. Faced with that ‘gun to its head’ - especially if the equipment is really valuable or useful, like locomotives - the railroad caves in and pays up to get its account current, and stay that way. The railroad can do that because it can obtain new ‘priority’ financing after it is in the bankruptcy process as a Chapter 11 reorganization, which railroads almost always are (instead of Chapter 7 liquidations).
Every once in a while, though - like maybe once in a generation - a debtor railroad will concede that it can’t pay for and/ or doesn’t need the equipment, and return it to the lender. Then what does the lender do with likely older and worn equipment ? Well, the most recent significant such case that I’m aware of was about a half-dozen ex-E-L ALCo C-420’s (I think) that either the E-L trustee, the USRA, or ConRail decided weren’t wanted any more. So the lender reclaimed them and sold them to BC Rail, where most ended their working lives. However, I believe that 1 or 2 came back to upper New York State sometine in the 1980s to work for a short line. Whether they’re still there or what happened to them aft
Perhaps you can, Paul. All I can do here is share what I remember, purely from an observer’s standpoint, in three distinct cases:
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Rock Island–when the railroad was finally shut down in the 1980s, most of the equipment was parceled out by the North American Car Corporation. Chicago & North Western got a lot of the newest cars, and others went to the GTW, P&LE, SSW, and EJ&E/B&LE. Some of the older stuff couldn’t be gotten rid of at all, and eventually just vanished. The big exception was all of the equipment from the early 1970s which Union Pacific financed for the RI–that suddenly went back to them.
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National Railway Utilization Corporation–Those blue IPD box cars were everywhere, and still coming, when all of a sudden they started showing up in other reporting marks–like CNW, BN, ICG, KCS, ATSF, and a lot of short lines. The original reporting marks on these cars (PICK, NSL, MNJ, PT, HOSC) didn’t last much longer. The railroads might still be in business, though, albeit under new names.
3: Railbox–The original Railbox cars, built in 1974 through 1976 were suddenly rounded up and parceled out to a bunch of railroads. I had heard that they defaulted on the loan, and the cars were going back to the railroads that had financed them: BN, ATSF, C&O, SBD, RF&P, Southern, SP, and UP. Within a few years, the cars went to other places–it might be surprising to see where some of them have wound up. BNSF still has its ex-BN cars (but not the ATSF cars), CSX still has the ex-C&O and SBD cars, but the rest have been pretty well dispersed. Some are barely recognizable any more–one railroad, the Wisconsin Central (which got many of the ex-Southern cars) rebuilt some with cushioning, and/or plug doors, and/or an increase in height.
In all of these cases, I don’t think that someone came in with a locomotive during the night and assembled them all before taking them away (I do remember long strings of the ex-ROCK cars coming to us from somewhere, pretty much organized into thei