Consolidated Rail Corp. stockholders will be asked to approve creation of a holding company structure for the Philadelphia-based railroad at the May 26 annual meeting.
Conrail is the only major publicly owned railroad not organized as a holding company. By forming a holding company, the corporation will be able to issue debt and engage in other activities more freely.A holding company can avoid regulatory scrutiny and public disclosure of competitive information that other railroads now keep secret.
For example, the proposed holding company could issue debentures and other debt financing without having to seek Interstate Commerce Commission approval. Railroad debt financing would continue to be subject to commission review.
Non-rail subsidiaries can be formed without receiving commission permission.
Conrail is negotiating a joint venture with Norfolk Southern Corp. to create a retail intermodal company. Norfolk Southern, which is a holding company, has said it plans to keep the Triple Crown Service Inc. subsidiary outside the railroad.
Putting the new company into the holding company instead of directly under the railroad means it would not be subject to either the Railway Labor Act or Railroad Retirement Act.
A spokesman said the announcement was made now, before the proxy statement is mailed to stockholders, because Conrail is processing debt financing for a previously announced locomotive acquisition. Because lenders were being informed of the company's plans, it was decided to make the information generally available.