45 U.S.C. § 662 — Guarantee of certificates

(a) Authority and prerequisites. Trustees of a railroad reorganizing under section 77 of the Bankruptcy Act may, with court approval, ask the Secretary to guarantee certificates. After consulting the Board, the Secretary may guarantee them only after written findings that (1) stopping essential transportation would endanger public welfare, (2) stopping is imminent, (3) no practical funding source other than the certificates exists for payroll and other necessary service expenses, (4) the certificates cannot be sold without a guarantee, (5) the railroad can reasonably become self-sustaining, and (6) liquidation asset value reasonably protects the United States. At least 15 days before making the finding, the Secretary must publish notice in the Federal Register, allow interested people and Federal agencies to submit written information, views, or arguments, with or without oral presentation, and consider relevant submissions. For good cause and extraordinary circumstances, the Secretary may waive those notice and submission requirements. The Secretary may also waive the findings in paragraphs (1), (5), and (6).

(b) Guarantee conditions. The Secretary must require that (1) certificate-sale proceeds be used only for payroll and expenses whose nonpayment would stop essential service; (2) other railroad revenue be used as fully as possible for those expenses; (3) asset-sale proceeds be used as fully as possible for essential service; and (4) if essential service actually stops or is threatened, the Secretary may buy or lease trackage rights and equipment needed to provide the service, and after a certificate default, United States money paid or expenses incurred count toward the purchase or lease price. The reorganization court must approve purchase or lease terms, and the Board must approve operation under title 49, but service may not wait for those proceedings to end.

(c) Priority. The Secretary may not guarantee a certificate unless it is treated as an administrative expense and has the highest lien on railroad property and payment priority under the Bankruptcy Act. This does not apply to a railroad actively restructuring as defined by the Secretary. “Restructuring” includes an employee-ownership plan or employee-shipper-ownership plan.

(d) Terms. A certificate bears the annual interest rate the Secretary finds reasonable after considering private-market rates for similar loans and Federal risks. Its maturity, including extensions and renewals, may not be later than 15 years after original issuance. The Secretary may set other terms and must consider requiring disposal of nonrailroad assets as a guarantee condition. (e) The total principal outstanding under all guarantees may not exceed $200,000,000 at any time. (f) The Secretary must issue rules and regulations appropriate to carry out this chapter.