§826. Redeemable preference shares

(a) Characteristics

The redeemable preference shares acquired by the Secretary pursuant to section 825(d) of this title are securities which are issued by a railroad ¹ employee or employer-shipper ² group for the purpose of obtaining financing under this subchapter. Each such redeemable preference share-

(1) shall be nonvoting and shall have a par value of $10,000;

(2) shall be senior in right (i) to all common stock of the issuing railroad ¹ employee or employer-shipper ² group, whenever issued, except that the Secretary may make any such redeemable preference share subordinate to any common stock which was issued as a result of an exchange for securities which were senior in right to common stock, if (I) such exchange took place pursuant to a court-approved reorganization plan under section 77 of the Bankruptcy Act, and (II) the railroad ¹ employee or employer-shipper ² group subject to such reorganization plan was in reorganization under such section 77 prior to October 19, 1976, (ii) to any previously issued preferred stock where such seniority does not mitigate any rights of the holders of such stock accorded by the terms and conditions of such stock, and (iii) to any subsequently issued preferred stock, with respect to dividend and redemption payments and in case of liquidation or dissolution of such railroad ¹ employee or employer-shipper ² group, but shall be otherwise subordinate in such matters to any of such railroad's ¹ employee or employee-shipper group's previously issued and outstanding securities which rank ahead of its common stock and shall be subordinate to all securities other than common stock (except in those cases in which the Secretary has provided for subordination pursuant to clause (i) of this paragraph) which is received in exchange as a part of a court approved reorganization plan under section 77 of the Bankruptcy Act approved after February 5, 1976 for previously incurred senior debt or previously issued and outstanding securities which ranked ahead of its common stock;

(3) shall accrue dividends, commencing on the 10th anniversary date of the date of its original issuance, at such rate as shall be fixed by the Secretary for each issuance prior to the issuance thereof and which, when added to the amount of the mandatory redemption payments under subparagraph (4) of this paragraph, shall return to the Fund not less than 150 percent of the aggregate par value thereof, over the scheduled life of the issue and in annual payments which shall be as nearly equal as practicable; and

(4) shall be subject to mandatory redemption, at par, commencing not earlier than the 6th and not later than the 11th (as determined by the Secretary for each issuance) anniversary date of the date of its original issuance, in annual amounts which shall, over the period ending (as determined by the Secretary for each issuance) not later than the 30th anniversary date of the date of its original issuance, aggregate the total par value of such share and, except to permit the railroad ³ employee or employer-shipper ⁴ group to prepay its redemption payments, the number of such annual redemption payments shall in no event be less than 15; and

(5) the proceeds from the issuance of which are to be expended solely to reduce the deferred maintenance on facilities, shall in no event yield (A) less than the minimum permissible yield determinable in accordance with paragraphs (3) and (4) of this subsection, nor (B) more than such railroad's ³ employee or employee-shipper group's rate of return on total capital (represented by the ratio which such carrier's net income, including interest on long-term debt, bore to the sum of the average shareholder's equity, long-term debt, and accumulated deferred income tax credits for the three fiscal years preceding the date of submission of the application) as determined in accordance with the uniform system of accounts promulgated by the Commission in those cases in which such rate of return exceeded such minimum permissible yield.

(b) Deposit

All redeemable preference shares which are acquired by the Secretary pursuant to section 825(d) of this title shall, upon such acquisition, be deposited in the Fund.

(c) Overdue payments

Whenever any dividend or redemption payment which is due on redeemable preference shares issued by any railroad ³ employee or employer-shipper ⁴ group remains unpaid for a period of 4 months, the Secretary shall be entitled to appoint two members to the Board of Directors of such railroad ³ employee or employer-shipper ⁴ group. The term of office of such members shall not extend beyond the period during which such dividend or redemption payments ⁵ remains unpaid.

( Pub. L. 94–210, title V, §506, Feb. 5, 1976, 90 Stat. 73 ; Pub. L. 94–555, title II, §§213, 214, Oct. 19, 1976, 90 Stat. 2624 , 2625; Pub. L. 96–448, title IV, §405(c)(3)(A), (C), Oct. 14, 1980, 94 Stat. 1946 , 1947.)

References in Text

Section 77 of the Bankruptcy Act, referred to in subsec. (a)(2), was classified to section 205 of former Title 11, Bankruptcy. The Bankruptcy Act (act July 1, 1898, ch. 541, 30 Stat. 544 , as amended) was repealed effective Oct. 1, 1979, by Pub. L. 95–598, §§401(a), 402(a), Nov. 6, 1978, 92 Stat. 2682 , section 101 of which enacted revised Title 11. For current provisions relating to railroad reorganization, see subchapter IV (§1161 et seq.) of chapter 11 of Title 11.

Amendments

1980-Subsec. (a). Pub. L. 96–448, §405(c)(3)(A), (C), inserted "employee or employer-shipper group" after "railroad" wherever appearing and "employee or employee-shipper group's" after "railroad's" in two places.

Subsec. (c). Pub. L. 96–448, §405(c)(3)(A), inserted "employee or employer-shipper group" after "railroad" in two places.

1976-Subsec. (a)(2)(i). Pub. L. 94–555, §213(1), inserted exception that Secretary has authority to make redeemable preference shares subordinate to common stock under certain named conditions.

Subsec. (a)(2)(iii). Pub. L. 94–555, §213(2), inserted "(except in those cases in which the Secretary has provided for subordination pursuant to clause (i) of this paragraph) which is" after "other than common stock".

Subsec. (a)(4). Pub. L. 94–555, §214(a), inserted "and, except to permit the railroad to repay its redemption payments, the number of such annual redemption payments shall in no event be less than 15; and" after "value of such share".

Subsec. (a)(5). Pub. L. 94–555, §214(b), added par. (5).

Effective Date of 1980 Amendment

Amendment by Pub. L. 96–448 effective Oct. 1, 1980, see section 710(a) of Pub. L. 96–448, set out as a note under section 10101 of Title 49, Transportation.

Effective Date of 1976 Amendment

Amendment by Pub. L. 94–555 effective Oct. 1, 1976, see section 303 of Pub. L. 94–555, set out as a note under section 702 of this title.

Section Referred to in Other Sections

This section is referred to in sections 822, 825 of this title.

¹ So in original. Probably should be followed by "or".

² So in original. Probably should be "employee-shipper".

³ So in original. Probably should be followed by "or".

⁴ So in original. Probably should be "employee-shipper".

⁵ So in original. Probably should be "payment".