The giant Penn Central Railway system, one of America's biggest corporations, has filed a petition for reorganisation of its affairs under the Bankruptcy Act saying it can no longer pay its bills.
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Background: The giant Penn Central Railway system, one of America's biggest corporations, has filed a petition for reorganisation of its affairs under the Bankruptcy Act saying it can no longer pay its bills.
The Penn Central Transportation Company with assets of almost 7,000 million dollars (2,916 pounds sterling), which include 29 acres of the finest skyscrapers and offices blocks in midtown Manhattan, said on Sunday (21st June) it was taking the action because of a severe cash squeeze, and because of an inability of acquire additional working capital.
The reorganisation statute empowers railroads to operate under trusteeship while efforts are made to work out solutions for financial problems. while Penn Central continues operating under these conditions the Senate Transportation subcommittee is probing the circumstances that caused the bankruptcy.
Penn Central operates 35 per cent of the nation's rail passenger service and two thirds of all trains carrying people in the East. Despite this the corporation lost 101 million dollars (42 million pounds) in the first three month of this year, and last year's losses totalled 121 million dollars (51 million pounds). Secretary of Transportation, John Volpe, tola d news conference at the White House that the length of time the corporation would be able to continue providing a service would depend on how the bankruptcy case was handled.