NYSW/CNYK Southern Tier lease

I understand that we are half way through this 20 year lease. NS has benefited, but has the NYSW made a sound investment? They are paying rent on a line they can't develop industry on. Is it worth it for them? I believe WR made this deal a decade ago. Thoughts?

northjerseybuff wrote:I understand that we are half way through this 20 year lease. NS has benefited, but has the NYSW made a sound investment? They are paying rent on a line they can't develop industry on. Is it worth it for them? I believe WR made this deal a decade ago. Thoughts?

NYSW is a subsidiary of NS. The deal was made in 2005, long after NS and CSX exercised control over NYSW. The lease of the track to NYSW was a way to get those miles off the NS books, for one. It's also not adding any mileage to NYSW, since it's registered as the CNYK railroad. Whether or not it's "good" for NYSW doesn't really matter as NS writes off the losses, if any. I'm over-simplifying the situation, but that's they way I understand it.

-otto-

And CNYK has been able to obtain substantial public assistance to upgrade and maintain the tracks in both NY and PA. This is something NS would not have been able to do.

I am sure, due to the route miles hauled, NYS&W also benefits from the fee it can charge to shippers as the line is an all DO route.

It seems like the NYSW/CNYK was forced into the lease by NS with the threat of their route being downgraded/no longer available.

I wouldn't look at the length of the lease at all. It can be renewed after the 20 year mark, so it will be around for as long as NS wants it to be around. NS can also cancel it at any time.

There would be no way for a railroad to turn a profit on this stretch of track without a very good overhead traffic base. The benefit of the lease is the tax breaks and government grants. Just yesterday, they announced $3.1 million for track rehabilitation for the route. Why the route needs upgrading? Well that is up to anyone's imagination.

My guess is at worst it's a wash. When they ran it via trackage rights, there were expenses involved for each train. Now they control the line, so those expenses go away and as noted they can get grants and the like to maintain the track. But as noted it all amounts to just some juggling of the books, NS still technically controls the track (CSX's only real interest here is they get a detour route once in a while if they need it).

Otto Vondrak wrote:

northjerseybuff wrote:I understand that we are half way through this 20 year lease. NS has benefited, but has the NYSW made a sound investment? They are paying rent on a line they can't develop industry on. Is it worth it for them? I believe WR made this deal a decade ago. Thoughts?

NYSW is a subsidiary of NS. The deal was made in 2005, long after NS and CSX exercised control over NYSW. The lease of the track to NYSW was a way to get those miles off the NS books, for one. It's also not adding any mileage to NYSW, since it's registered as the CNYK railroad. Whether or not it's "good" for NYSW doesn't really matter as NS writes off the losses, if any. I'm over-simplifying the situation, but that's they way I understand it.

-otto-

They are not a subsidiary of NS. NS and CSX have 1 member each on NYSW's board thats it. They dont own NYSW. NYSW is its own railroad. This was established about 2 years ago. Walter Rich did borrow money from the 2 railraods and had paid it all back before his death or his estate had paid it off soon after his passing.

Is NYSW a privately held or publicly-traded corporation? If public, then the board list is probably available somewhere, as well as annual reports, etc. "Governance" was not obvious on http://www.nysw.com" onclick="window.open(this.href);return false;, so I am inclined to believe it is private. WHich means all of us outsiders are really in the dark. Same for CNYK I would assume. Anyone here really know? JS

pumpers,

It is privately owned. With the NS / CSX takeover of Conrail, Walter Rich made an agreement with NS/ CSX to take the company private. It has been that way ever since. It is rumored both CSX and NS each have a 10% interest in the company, hence the seat on the board. But it should also be said the reason passenger excursions ceased on the NYS&W is due to the NS / CSX involvement and the very strict insurance requirements those companies imposed.

I am unsure who ended up with controlling ownership after Mr. Rich's death and I don't think that has ever been announced publicly.

The rumors about who actually owns the railroad are pretty widely varied and because the company is now private there's no way to know unless someone discloses the actual interests.

NS and CSX basically bought out the stock to avoid having any problems when they split Conrail between them. Then they apparently financed Rich buying back an unknown percentage of the stock. In that way it remained Walter's railroad but they continued to have some influence over the company. Just who exactly owns what or owes yet for loans is unknown.

This is why I think at worst it's a wash for NYS&W/CNYK to control the Tier. THe expenses of running it on trackage rights go away, and they can more easily obtain funding to cut into the expenses of actually controlling it. At what, three trains a week? They were able to turn off the signals and cut back on maintenance, too.

Although the original intent was to turn the signals off this was never done. The signals were actually upgraded. No more line side wires, all the signal wires run underground now.

lvrr325 wrote:The rumors about who actually owns the railroad are pretty widely varied and because the company is now private there's no way to know unless someone discloses the actual interests.

NS and CSX basically bought out the stock to avoid having any problems when they split Conrail between them. Then they apparently financed Rich buying back an unknown percentage of the stock. In that way it remained Walter's railroad but they continued to have some influence over the company. Just who exactly owns what or owes yet for loans is unknown.

This is why I think at worst it's a wash for NYS&W/CNYK to control the Tier. THe expenses of running it on trackage rights go away, and they can more easily obtain funding to cut into the expenses of actually controlling it. At what, three trains a week? They were able to turn off the signals and cut back on maintenance, too.

maintenance hasn't been cut back, they have done extensive tie replacements over the last few years, put in welded rail where stick rail was, upgraded the signals, redecked several bridges and have or will be installing power switches where spring switches are currently. Grade crossings have been upgraded aswell. All of this was done on teh tier, the nj sectin has received the same treatment minus the signals.