Auto-train Corp. has withdrawn its application for a $3 million federal-loan guarantee through the Department of Commerce Economic Development Administration.
The financially troubled Washington railroad apparently dropped its bid for a government bailout after a dispute with EDA that could have lead to rejection of the application.
Auto-Train spokesman yesterday confirmed EDA reports that the loan application had been dropped, but declined to comment on the situation.
The company said, however, that withdrawal of the EDA loan application, is not the reason why trading in Auto-Train stock has been suspended for the past three days.
Last Friday the company said it had asked the American Stock Exchange to halt trading in the stock "pending an announcement." Yesterday a spokesman said that announcement will come in the next day or two.
Auto-Train has lost more than $6 million in the past three years and recently suffered a series of setbacks in its efforts to obtain new financing.
In addition to the government guaranteed loan, Auto-Train is seeking approval from the Interstate Commerce Commission to issue $3 million in notes and has asked its stockholders to approve creation of a new class of stock. The company says it hopes to raise $8 million by selling 800,000 shares of convertible preferred stock.
The ICC, however, has ruled that Auto-Train cannot issue the notes until it repays $800,000 in overdue refunds to passengers. The company had hoped to use the funds borrowed through EDA to do that.
At its annual shareholders meeting last week, Auto-Train failed to get the majority vote needed to approve the new stock. The company was forced to adjourn the meeting until next Monday while it attempts to get more stockholders to cast ballots for the plan.
The new stock offering has become the company's major hope for raising additional money. Originally slated to be a $6 million stock issue, the size of the proposed offering was recently raised to $8 million, apparently to make up for loss of the EDA money.
Auto-Train's present financial status is uncertain; the company's fiscal report for the three months ended June 30 was supposed to have been filed with the Securities and Exchange Commission last Wednesday but is overdue. The company has in the past blamed bookkeeping problems for its failure to report to the SEC on time.
The SEC began an investigation of the company more than a year ago, and recently formally notified EDA officials that the investigation is still under way.
Ironically Auto-Trains financial problems are coming to a head at a time when prospects for the company's business are brightening.
Since the gasoline shortage began earlier this spring, ridership has climbed dramatically on the train that shuttles passengers and their cars between Lorton, Va., and Stanford, Fla.
The railroad has also said it is completing efforts to extend its northern terminus to the New York City area. The plan is to pick up cars near the Newark airport and let passengers fly to Florida so their car is waiting for them.
The company says it is completing an agreement to offer Auto-Train service in Mexico, from near the U.S. border to the outskirts of Mexico City.
Auto-Train also is starting a new railway service division that will build and repair freight cars for other railroads. The new stock offering is supposed to provide capital for the freight car business.