The federal bankruptcy court yesterday shut down Auto-Train, one of this country's last privately owned interstate passenger railroads, effective next Friday.
Bankruptcy Judge Roger Whalen halted the train at the request of trustee Murray Drabkin, who has run the railroad since shortly after Auto-Train Corp. filed for reorganization in bankruptcy last September.
At a hastily arranged court hearing yesterday morning, Drabkin said the company rapidly ran out of cash after the collapse this week of plans for a group of investors headed by G. William Middendorf II to by control of the railroad.
There isn't even enough money to buy diesel fuel for the locomotives, Auto-Train officials told the court, and the telephone company had served notice it would cut off service at 5 p.m. Friday unless a $12,000 bill was paid.
Pleading for court approval "to wind down this business with dignity and decorum," Drabkin said he had been up all night and had signed an agreement at 6 a.m. yesterday to provide enough money to run the train one more week and give Auto-Train's 400 employes their final paycheck next Friday.
Auto-Train, which carries passengers and their cars between suburban Lorton and central Florida, has about 60 employes in its headquarters at 1801 K St. NW. About 100 more work at its suburban Lorton terminal and 200-plus are based at the other end of the line in Sanford, Fla. Except for a few needed to close up shop, all Auto-Train workers will be laid off after next week's final run.
Also left at the station by the abrupt shutdown will be thousands of Auto-Train passengers who have already paid for tickets to travel after May 1. They will become "priority creditors" of the bankrupt railroad, but it is not certain they will get their money back, admitted company spokesman Thomas Tucker.
The standard passengers are expected to get back more of their money than Auto-Train's shareholders. The stock sold during the early 1970s for as much as $60 a share, but was down to less than $1 when the company filed for bankruptcy, and is now virtually worthless.
Auto-Train was founded a decade ago by a Washington lawyer, Eugene Keri, Garfield, who promised to do what no other U.S. railroad could -- carry passengers and make a profit. For a time the railroad made money, but after several costly accidents and unprofitable expansion, Auto-Train ran into the red and never came out.
Garfield, whose 10 percent interest in the company was once worth more than $50 million, was ousted when bankruptcy trustee Drabkin took over the company. He could not be reached for comment yesterday.
Judge Whalen noted that Auto-Train's "future financial picture is obviously more than bleak," after an accountant testified the company has $24 million in debts, only $2 million to $4 million in assets, and not enough cash to run this weekend's trains.
Drabkin said Auto-Train immediately ran short of cash when a group of Washington investors who had planned to buy controlling interest in the railroad backed out of the deal last week.
Middendorf, president of Financial General Bankshares Inc., and a group of associates last November lent Auto-Train $400,000, and in late March signed an agreement to buy the railroad operations of the bankrupt company for more than $1 million.
But the deal was not completed on April 15 as planned, and after several delays attorney G. James Frick formally notified Drabkin on Thursday "that it is not possible to raise the short-term funds needed."
Frick told the bankruptcy court yesterday the Middendorf group still plans to submit a plan for taking over Auto-Train by May 1 and hopes to restart the railroad next fall.
Under the termination agreement signed yesterday, the Seaboard Coast Line and Richmond Fredricksburg and Potomac railroads yesterday gave Auto-Train $800,000 so it could pay its telephone bill, buy fuel, run for another week and then close its doors in an orderly fashion, Drabkin said.
Auto-Train owes Seaboard and RF&P several million dollars, but the two railroads agreed to give the bankrupt company more money on the condition that Auto-Train shut down immediately to protect them from further losses.