WATERLOO, IOWA, SEPT. 2 -- The Chicago, Central and Pacific Railroad, owned by former D.C. real estate figure Jack Haley, has filed for protection from creditors in U.S. Bankruptcy Court to ward off a takeover attempt by a credit firm, railroad lawyers said today.
Steve Pace, a Cedar Rapids attorney representing railroad Jack, said the Chapter 11 filing was designed to keep the railroad's chief creditor, General Electric Credit Corp., at bay while it reorganizes.
The financing firm lent Haley $75 million in 1985 to buy the line -- formerly the Illinois Central-Gulf Railroad's Iowa division, which runs on tracks from Chicago through northern Illinois and Iowa to Sioux City and Council Bluffs.
Haley, who was once in the real estate business in the District of Columbia, also runs a short-line railroad in northern Iowa and the popular Star Clipper dinner train. Those entities are not involved in the bankruptcy, lawyers said.
"The railroad is still viable. It's profitable but for the difficulties with GECC," Pace said.
Robert Kleinman, a Chicago lawyer also representing the railroad, said the line has a good operating ratio and was able to set aside $11 million for debt service.
"This is an unusual railroad bankruptcy," Kleinman said. "The line is doing quite well but there were differences in managerial style and direction between Mr. Haley and General Electric Credit."
A spokesman for the credit firm in Stamford, Conn., said the company had no comment on the dispute.
Haley has won attention in railroad circles for his two-man train crews and unique marketing techniques. He was not available for comment.
The company listed assets of $95 million and liabilities of $91 million in the filing. Pace said the Chicago Central has secured debt of $79 million, the large majority held by the GE credit office.
Kleinman said Haley and GE had been negotiating for several weeks over the financing dispute but the talks broke off when the credit firm threatened to foreclose. Haley has sued GECC for $250 million, claiming breach of contract and fraud.
Kleinman said the bankruptcy was "precipitated by GE's intransigence.'