Filed by: CSX Corporation, Norfolk Southern Corporation
and Consolidated Rail Corporation
Pursuant to Rule 425
under the Securities Act of 1933, as amended.
Subject Company: Consolidated Rail Corporation
Commission File Nos.: 1-8022 and 1-8339
On June 4, 2003, CSX Corporation, Norfolk Southern Corporation and Consolidated
Rail Corporation issued a joint press release announcing the filing of a
petition with the United States Surface Transportation Board. The text of the
joint press release follows.
[CSX Corporation Logo] [Norfolk Southern [Consolidated Rail
Corporation Logo] Corporation Logo]
FOR IMMEDIATE RELEASE
JUNE 4, 2003
Contacts: Gary Sease
(904) 366-2949
CSX Corp.
Rudy Husband
(610) 567-3377
Norfolk Southern Corp.
Jonathan M. Broder
(215) 209-4594
Consolidated Rail Corp.
CSX, NS, CONRAIL ASK STB TO TRANSFER NYC, PRR
CSX and NS Seek To Acquire Direct Ownership of Conrail Subsidiaries
WASHINGTON, D.C. June 4, 2003 - CSX Corporation (CSX), Norfolk Southern
Corporation (NS), and Consolidated Rail Corporation (Conrail) today announced
the joint filing of a petition with the Surface Transportation Board (STB) to
establish direct ownership and control by CSX Transportation, Inc. (CSXT) and
Norfolk Southern Railway Company (NSR), the railroad subsidiaries of CSX and NS,
respectively, of two Conrail subsidiaries - New York Central Lines LLC (NYC) and
Pennsylvania Lines LLC (PRR).
CSXT and NSR are currently managing and operating NYC and PRR, respectively,
under operating agreements approved by the STB in 1998. CSX and NS jointly
acquired Conrail in 1997.
The proposed transaction would replace the existing operating agreements and
allow CSXT and NSR to operate NYC and PRR, respectively, via direct ownership.
The petition, if approved, would make the financial, operational and
administrative management of Conrail, NYC and PRR more efficient in an
increasingly competitive transportation environment and facilitate CSX and NS
capital investment in those properties. After the consummation of the proposed
transaction, CSXT and NSR, as direct owners of NYC and PRR, respectively, would
no longer be dependent upon the consent of the other for many decisions relating
to their management of the underlying assets of NYC and PRR.
The proposed transaction would not affect rail operations, service or
competition, and would have no adverse effect on customers or the employees of
CSXT and NSR. Furthermore, the proposed transaction does not involve those
assets of Conrail referred to in the petition as the
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Shared Assets Areas (separately designated as North Jersey, South
Jersey/Philadelphia, and Detroit), and would have no effect on the competitive
rail service provided in those Shared Assets Areas. Conrail would continue to
own, manage and operate the Shared Assets Areas as previously approved by the
STB.
As stated in the petition, the proposed transaction would offer a number of
important benefits and eliminate financial complexities that have increased due
to changing conditions since June 1, 1999, when CSXT and NSR began operating the
NYC and PRR assets. If approved, the proposed transaction would improve the
transparency of the financial reporting of CSX and NS by consolidating the
financial results of NYC and PRR into those of CSX and NS, respectively. In
addition, the proposed transaction would permit CSX and NS to achieve increased
independence over the management of the assets of NYC and PRR as a result of
CSXT and NSR becoming direct owners of NYC and PRR, respectively.
The proposed transaction is subject to a number of conditions, including STB
approval and an Internal Revenue Service ruling qualifying it as a non-taxable
disposition.
If these and other conditions are satisfied, Conrail intends to undertake a
restructuring of its existing unsecured and secured public indebtedness. There
are currently two series of unsecured public debentures with an outstanding
principal amount of $800 million and 13 series of secured debt with an
outstanding principal amount of approximately $400 million. It is currently
contemplated that guaranteed debt securities of two newly formed corporate
subsidiaries of CSXT and NSR would be offered in a 42%/58% ratio in exchange for
Conrail's unsecured debentures. The debt securities to be issued by CSXT's new
subsidiary would be fully and unconditionally guaranteed by CSXT and the debt
securities to be issued by NSR's new subsidiary would be fully and
unconditionally guaranteed by NSR. Upon completion of the proposed transaction,
the new debt securities would become direct unsecured obligations of CSXT and
NSR, respectively, and would rank equally with all existing and future senior
unsecured debt obligations, if any, of CSXT and NSR.
The new debt securities that will become direct unsecured obligations of CSXT
and NSR will have maturity dates, interest rates and principal and interest
payment dates identical to those of the respective series of Conrail's unsecured
debentures. In addition, these new debt securities will have covenant packages
substantially similar to those of the publicly traded debt securities of CSX and
NS, respectively.
Conrail's secured debt and lease obligations will remain obligations of Conrail
and are expected to be supported by new leases and subleases which, upon
completion of the proposed transaction, would be the direct lease and sublease
obligations of CSXT or NSR.
Conrail anticipates that after the proposed transaction, the existing ratings of
its secured debt would be affirmed, and that the debt ratings of the proposed
new unsecured debt securities issued by the newly formed subsidiaries of CSXT
and NSR would be at least equal to that of the present corresponding Conrail
unsecured debentures.
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The NYC lines operated by CSXT include those running from New York/New Jersey
through Albany, New York, and Buffalo, New York to East St. Louis, Illinois, and
from Albany to Boston. The NYC assets also include former Conrail rolling stock.
The PRR lines operated by NSR include those running from New York/New Jersey and
Philadelphia, Pennsylvania through Pittsburgh, Pennsylvania and Cleveland, Ohio
to Chicago, Illinois. The PRR assets also include former Conrail rolling stock.
CSX, based in Jacksonville, Fla., owns the largest rail network in the eastern
United States. CSXT and its 34,000 employees provide rail transportation
services over a 23,000 route-mile network in 23 states, the District of Columbia
and two Canadian provinces. CSX also provides intermodal and global container
terminal operations through other subsidiaries.
NS through its NSR subsidiary operates 21,500 route miles in 22 states, the
District of Columbia and Ontario, serving every major container port in the
eastern United States and providing connections to western rail carriers. NS
operates an extensive intermodal network and is the nation's largest rail
carrier of automotive parts and finished vehicles.
Registration statements on Form S-4 will be filed with the U.S. Securities and
Exchange Commission (SEC) in connection with the proposed exchange offer.
Prospectuses and related exchange offer materials will be mailed to holders of
Conrail's unsecured debentures in connection with the proposed exchange offer.
These documents will contain important information about the proposed
transaction and the proposed exchange offer. Investors and holders of Conrail's
unsecured debentures are urged to read these documents carefully when they
become available. Upon the filing of these documents with the SEC, investors and
holders of Conrail's unsecured debentures will be able to obtain free copies of
these documents through the website maintained by the SEC at http://www.sec.gov.
In addition, free copies of these documents, when filed with the SEC, may be
obtained from Conrail by directing a request to Consolidated Rail Corporation,
2001 Market Street, Philadelphia, PA 19103, Attention: Corporate Secretary,
(215) 209-4054.
In addition to the registration statements and prospectuses, CSX and NS file
annual, quarterly and special reports, proxy statements and other information
with the SEC. These SEC filings are available to the public through the website
maintained by the SEC at http://www.sec.gov.
This press release contains forward-looking statements within the meaning of the
Federal securities laws. You should exercise caution in interpreting and relying
on forward-looking statements because they involve known and unknown risks,
uncertainties and other factors which are, in some cases, beyond the control of
CSX Corporation, Norfolk Southern Corporation and Consolidated Rail Corporation
and could materially affect actual results, performance or achievements. These
factors include, without limitation, that completion of the aforementioned
offering is subject to, among other things, regulatory approvals and market
conditions, that no assurance can be given that the offering can be completed
under acceptable terms or on the anticipated timetable, and other risks and
uncertainties detailed from time to time in the filings of CSX Corporation and
Norfolk Southern Corporation with the SEC.
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