CSXT and NSR File Registration Statements with SEC to Exchange Debt Securities for Conrail’s Debt Securities

WASHINGTON – CSX Transportation, Inc. (CSXT) and Norfolk Southern Railway Company (NSR) on April 23 said they have taken a key step in establishing direct ownership and control of the two Consolidated Rail Corporation (Conrail) subsidiaries that contain the Conrail assets they currently separately operate.

CSXT and NSR each have filed a Registration Statement on Form S-4 with the Securities and Exchange Commission (SEC) that describes an offer to exchange new unsecured debt securities of CSXT and NSR and cash for unsecured debt securities of Conrail. The filings initiate the final stage in implementing the restructuring of Conrail’s unsecured indebtedness as described in the parties’ joint petition filed June 4, 2003 with the Surface Transportation Board (STB).

In connection with the offer to exchange, Conrail is soliciting consents from holders of its unsecured debt securities in order to permit the restructuring. As described in the Registration Statement, Conrail also intends to solicit the consents of certain holders of its equipment trust certificates and pass through trust certificates. The solicitation of these certificate holders is expected to occur concurrently with the proposed exchange offer and consent solicitation.

In May 1997, Norfolk Southern Corporation and CSX Corporation acquired control of 58% and 42%, respectively, of Conrail’s parent company.

In June 1999, NSR and CSXT each began operating certain Conrail assets pursuant to separate operating agreements between Conrail and NSR and Conrail and CSXT.

In November 2003, the STB authorized NSC, CSX and Conrail to reallocate these assets of Conrail directly to NSR and CSXT, in proportion to their respective 58% and 42% ownership interests in Conrail. The purpose of the exchange offer and consent solicitation is to facilitate this distribution of assets which, if completed, would permit the more efficient management of Conrail in a manner that preserves competition and clarifies financial reporting by CSX and NSC. The remaining assets would continue to be managed and operated by Conrail for the joint benefit of NSC and CSX.

The Registration Statements may be reviewed by the SEC and will not be declared effective until any such review has been satisfactorily completed. Upon effectiveness of the Registration Statements, CSXT, NSR and Conrail intend to commence an exchange offer and consent solicitation with respect to Conrail’s unsecured debt. Under the exchange offer and consent solicitation, each of Conrail’s 93/4% Debentures due June 15, 2020 (currently $550 million outstanding) and 77/8% Debentures due May 15, 2043 (currently $250 million outstanding) tendered and accepted for exchange will be exchanged for new unsecured obligations of NSR and CSXT, each in proportion to their respective 58% and 42% ownership interests in Conrail, and a cash payment.

The debt securities offered in the exchange offer and consent solicitation will have economic terms, such as currency, interest rate and interest payment and maturity dates, substantially identical to those of the existing Conrail unsecured debt securities, other than the timing of the first interest payment. The new obligations of CSXT and NSR will have covenants and events of default substantially similar to those contained in existing indentures of CSX and NSC, respectively.

Assuming all of Conrail’s unsecured securities are exchanged, immediately after the settlement of the offers, and subject to the treatment of fractional interests, NSR would be the obligor of $319 million principal amount of 93/4% Notes due June 15, 2020 and $145 million principal amount of 77/8% Notes due May 15, 2043, and CSXT would be the obligor of $231 million principal amount of 93/4% Notes due June 15, 2020 and $105 million principal amount of 77/8% Notes due May 15, 2043. The dealer manager for the exchange offer and consent solicitation is Morgan Stanley & Co. Incorporated.

The completion of the exchange offer and consent solicitation is subject to a number of conditions, including Conrail’s successful solicitation of consents from the holders of certain of its secured debt obligations.

CSX Corporation, 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.

NSC 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. NSC operates an extensive intermodal network and is the nation’s largest rail carrier of automotive parts and finished vehicles.

Conrail is a principal freight railroad in the Northeastern United States, and is indirectly owned 58% by NSR and 42% by CSXT.

— PRNewswire