A trustee for the bankrupt Auto-Train Corp. yesterday asked a federal bankruptcy judge to block two rail lines from cutting off the railroad's access to tracks and key services necessary for the reorganization of the beleaugured company.
During a stormy three-hour hearing before U.S. Bankruptcy Judge Roger Whalen, Auto-Train attorneys said that unless the Seaboard Coast Line Railroad Co. and the Richmond, Fredricsburg and Potomac Railroad Co. are barred from altering service to the Washington-based railroad, attemps to recognize Auto-Train are hopeless. Whalen said he would rule on the motion as soon as possible.
"From a practical standpoint the termination of the SCL and RF&P services will sound the death knell for Auto-Train and will prematurely dash any hope for a successful reorganization" wrote Murray Drabkin, the bankruptcy trustee for Auto-Train in papers filed with the court.
The hearing, which took place late yesterday, could spell the end of Drabkin's one-week tenure as trustee for the railroad, unless he receives the sought-after injunction. But he also for the first time laid out his plans to save Auto-Train, including the possibility of seeking up to $3 million from the federal government.
But Robert Blanchette, an attorney for SCL, asked the court to "stop a prolonged and fruitless agony," suggesting that reorganization efforts are unlikely to bail out debt-ridden Auto-Train. SCL "cannot extend further credit to this trustee," Blanchette said.
Under the terms of a service contract, Auto-Train owes SCL about $5 million. SCL also has guaranteed a $2 million revolving line of credit. In addition, Auto-Train owes RF&P about $400,000, and RF&P is the guarantor of another $600,000 loan.
What makes the bankruptcy dispute so vital to the salvaging of Auto-Train is that the two other rail lines provide the tracks, maintenance and a variety of other services that Auto-Train uses in carrying cars and passengers from Lorton, Va., to Sanford, Fla. The tracks are essentially the only ones available to Auto-Train for those routes.
Only a last-minute agreement Friday, calling for Auto-Train to pay the two rail lines $23,960, enabled Auto-Train to operate its trains over the weekend.
Auto-Train says that the SCL and RF&P should allow the trustee's reorganization to be put into place, particularly this fall, when Florida tourism and therefore Auto-Train's revenues historically rise. Unlike creditors of most bankrupt company, SCL and RF&P offer, in effect, a monopoly service and cannot be permitted to cut off Auto-Train service, the trustee's lawyer argued.
Drabkin said in court yestterday that, if Auto-Train can continue to operate, he would ask the Department of Transportation for a $3 million loan guarantee, which could be used to pay for a variety of company operations.
Finally, Drabkin is hoping to petition the Interstate Commerce Commission to review the rates which Auto-Train is charged, alleging that the fees are excessive. But that petition would be of little use if Auto-Train cannot operate its rail service this fall and winter.
On the other hand, lawyers for SCL repeatedly pointed out yesterday that Auto-Train's record in paying off its obligation is not encouraging. Further, Blanchette and a witness called by his company stressed that SCL is liable for up to $500,000 in possible insurance claims, should Auto-Train cars be involved in an accident.
"All we are saying is that we are a provider of a service. We want to be paid," Blanchette said. After the hearing, another SCL lawyer was asked about his railroad's current view of the relationship with Auto-Train. "We would operate [with] Auto-Train as a Chinese Laundry," he said. They can use the tracks "if they give us the ticket."