dissenting in part in Nos. 778, 779, 830-836.
These cases present at least one serious problem under 49 U. S. C. § 5 (2). Section 5 (2) (a) authorizes two or more carriers to consolidate provided that the Commission finds under subdivision (b) that the “terms and conditions” are “just and reasonable” and “will be consistent with the public interest.” Moreover, under subdivision (d) of § 5 (2), the Commission “as a prerequisite to its approval” of the merger may require the inclusion of another railroad in the territory “upon equitable terms.”
I do not think the Commission has made those necessary findings under § 5 (2).
The majority opinion adopts a piecemeal approach to judicial review of the Commission’s orders, which, as I view it, does not conform with our duty of judicial review in one respect.
In the majority opinion last Term, Mr. Justice Clark noted that “[o]ur experience with other mergers, and common sense as well, indicate that the ‘scrambling’ goes fast but the unscrambling is interminable and seldom effectively accomplished.” Baltimore ■& Ohio R. Co. v. United States, 386 U. S. 372, 392. Because of this, we refused to allow the Penn-Central merger to be consummated before the fate of the three protected roads (the Erie-Lackawanna, Delaware & Hudson, and Boston & Maine) had been determined. Some aspects of the Commission’s merger and inclusion orders — those which do not go to the heart of the Commission’s decision (that is, its determination that the merger or inclusion is in *549the “public interest”) — can await later judicial review. Examples would be the contentions of Reading and the E-L bondholders. But I fail to see how we can affirm the Commission’s decision that this entire transaction is in the “public interest” without considering those points raised by the parties which do go to the heart of the controversy. I refer specifically to the contentions of the parties in the Middle District of Pennsylvania (see my partial dissent in Nos. 433, 663, Mise., and 664, Mise.), and to Nos. 830 and 831 which involve claims of the New Haven creditor interests, to which I now turn.
Certain bondholder interests of the New York, New Haven & Hartford Railroad Company (New Haven) attack the Commission’s failure to provide for actual inclusion of the New Haven in the Penn-Central system as a condition simultaneous with, or precedent to, consummation of the merger. Following the filing of these appeals, the Commission, on November 16, 1967, issued a decision concerning the treatment of the New Haven in the merger plan, styling the opinion as a supplemental order in the Penn-Central Merger Case. Pennsylvania Railroad Co.—Merger—New York Central Railroad Co., Finance Docket No. 21989, 3311. C. C. 643. On that date the Commission approved as a first step in the New Haven’s reorganization a conveyance of its assets to Penn-Central; it fixed terms for interim financing on the basis of a $25,000,000 loan commitment from Penn-Central; and it provided for the sharing of New Haven’s operating losses by Penn-Central, on a sliding scale, pending New Haven’s inclusion in the merged system. The Commission also specifically provided that consummation of the merger would constitute irrevocable assent by Penn-Central to enter into the interim financing arrangement.
The sale agreement proposed by the New Haven trustees provided for New Haven’s physical assets and investments to be purchased by Penn-Central free and *550clear of liens and other encumbrances. The lien of the New Haven creditors’ interests would shift from New Haven’s present assets to the assets held by the trustees as the proceeds of the sale. Provision for the preservation of priorities and rights of claimants was made in the plan. The trustees originally submitted, pursuant to § 77 of the Bankruptcy Act,1 a plan of reorganization to be accomplished in two steps. Initially, only the first step, providing for the sale of the New Haven to the merged Penn-Central system, was presented to the Commission for approval. After that part of the plan had been completed, the trustees intended to implement the second step, relating to distributing the assets of the New Haven estate or issuing new New Haven securities.
Certain bondholder interests contested the legality of the two-step plan. But in a decision rendered in May 1967 the Court of Appeals held that a decision on the legality of such a plan would be premature. In the Matter of the New York, New Haven & Hartford R. Co., 378 F. 2d 635 (C. A. 2d Cir. 1967). In September 1967 the New Haven trustees filed the second part of their plan, but requested the Commission to make immediate findings required under § 5 (2) (d) of the Interstate Commerce Act with respect to the first part of the plan, rather than await completion of the reorganization proceedings. Creditor interests opposed this request by arguing that creditor claims, in the order of priority, would have to be considered by the Commission before it could arrive at “equitable terms” within the meaning of § 5 (2) (d). The Commission chose to adopt the procedure suggested by the trustees, and approved the plan for the sale of assets independently of a complete reorganization plan.
In short, the Commission concluded that an immediate decision on the question under §5(2)(d) of “equitable *551terms” for the sale of assets would satisfy “a legal preliminary to NH inclusion without delay once the Penn-Central merger is consummated.” 2 On the other hand, it said, delay of such a decision until completion of New Haven’s reorganization would prevent a timely rescue of the New Haven as an operating common carrier. Thus, the Commission opted in favor of “improved service through a consummated Penn-Central merger including an operational NH, while the NH creditors are freed to litigate at will the distribution of their estate.” 3
The bondholder interests before this Court contend that under either the majority or dissenting opinions in St. Joe Paper Co. v. Atlantic Coast Line R. Co., 347 U. S. 298, any sale of the New Haven to the merged Penn-Central system would require at least its submission to a vote of bondholders. See also Reconstruction Finance Corp. v. Denver & Rio Grande Western R. Co., 328 U. S. 495. The bondholders also argue that the Commission ignored the admonition of this Court in Palmer v. Massachusetts, 308 U. S. 79, 88, that the powers of the Commission and courts under § 77 of the Bankruptcy Act can properly be exercised only in the context of “a complete plan of reorganization for an insolvent road.”
In justifying its action, the Commission noted that except for subsections (b)(1), (4), and (5), of §77, there is no provision in § 77 that deals specifically with the form or content of a reorganization plan. Therefore, no language of § 77 was believed to prohibit evaluation of the New Haven properties and the approval of their sale before approval of a plan for restructuring the New Haven. The Commission noted the doctrine *552of “wasting assets” employed under Chapter X of the Bankruptcy Act to permit two-step plans of reorganization, and analogized that doctrine to the instant case— since in the view of the Commission, the New Haven could properly be classified as a “wasting asset.” 4
With respect to interim financing of the New Haven, the Commission approved a loan proposal under which Penn-Central would make available to the New Haven a total of $25,000,000 over three years to enable the New Haven to continue its operations until its assets were conveyed to Penn-Central. The Commission noted that the loan authorization did not impair the jurisdiction of the reorganization court since that court would still have to approve issuance of trustees’ certificates to evidence those advances.5
The loan provisions approved by the Commission provided further that any time the cash balance of the New Haven fell below $5,000,000, the trustees could borrow *553from the $25,000,000 commitment enough money to equal a $5,000,000 cash balance plus $2,500,000. The Commission set an interval of at least three months between loan takedowns, and provided that any reduction in the aid which New Haven was receiving from the New England States would reduce correspondingly the amount that could be borrowed from Penn-Central. The interest rate on the loans was declared to be the prime rate of the Morgan Guaranty Trust Company of New York City prevailing at the time the loan is taken down. December 13, 1971, was designated as the maturity date for the trustees’ certificates. Finally, the loan provisions would be terminated upon the occurrence of any of the following events: (1) acquisition of the New Haven by Penn-Central; (2) a final and effective order by a regulatory authority or court granting permission to liquidate the New Haven or to dispose of it to someone other than Penn-Central; (3) cessation of the New Haven operation as a going railroad; (4) a determination that Penn-Central shall not acquire the New Haven; (5) the expiration of three years from the date of the Penn-Central merger.
Although the New Haven creditors argued before the Commission that their interests would be reduced by the issuance of the trustees’ certificates, which would acquire precedence over their claims against the New Haven estate, the Commission reasoned that:
“We consider such a result part of the process of distributing the burdens of the NH’s operations. It is a fundamental aspect of our free enterprise economy that private persons assume the risks attached to their investments, and the NH creditors can expect no less because the NH’s properties are devoted to a public use. Indeed, the assistance the creditors are receiving from the States and would *554receive from Penn-Central through the sharing of operating losses would raise some of that burden from their shoulders.” 6
The Commission did not place all of New Haven’s operating losses on Penn-Central during the period of the loan agreement. The amount to be absorbed by Penn-Central is governed by a specific formula approved by the Commission.7 With respect to deciding how much of the loss was to be assumed by Penn-Central under the formula, the Commission noted two main factors: (1) the admonition of the reorganization court that safeguards against endless litigation by New Haven creditors should be established; and (2) in the interim period before conveyance of New Haven’s assets to Penn-Central, the opportunities to integrate New Haven’s operations into the Penn-Central system would be restricted, so that many operating economies and efficiencies could not be realized until complete inclusion of the New Haven. The Commission felt that the existence of these factors tended to limit the portion of New Haven losses which Penn-Central should have to absorb under the formula. The final amount decided upon was 100% of the loss during the first year, 50% during the second, and 25% during the third. Further, the Commission set $5,500,000 as the maximum Penn-Central share of operating losses in any one year.
Finally, the Commission provided that under the purchase agreement, the trustees’ certificates evidencing the loans were to be offset in an amount equal to the operating loss absorbed by Penn-Central. The Commission asserted that the burdens on the New Haven creditors caused by the loan-loss absorption agreement would be relatively small — and not significantly different from the *555burdens under a lease agreement. The Commission expected that the total amount loaned by Penn-Central over three years would probably be “substantially less than $25 million.” 8 It noted that the requirements for loans would increase in relation to the operating losses of the New Haven; but as the operating losses increased, Penn-Central would absorb a part of the increase. At the same time, the Commission pointed out that since the amount of losses to be assumed by Penn-Central would decline each year (from 100% to 50% to 25%), the creditors would have much to gain by speedily completing the reorganization proceedings.
The bondholder interests attack the operating loss provisions of the Commission’s order — contending that Penn-Central should be required to absorb all the operating losses of the New Haven. They also assert that the purchase price approved by the Commission for the sale of New Haven assets to Penn-Central ($125,000,000, being the value of the consideration to be received by the New Haven) is too low. Further, as indicated above, they contend that the Commission is without authority to adopt a two-step reorganization plan which prevents the bondholders from voting on the first aspect of the plan — the sale of assets.
The New Haven trustees argue that the bondholders will have the opportunity to object to these actions of the Commission in the reorganization court and to seek judicial review of its action. Indeed, Oscar Gruss & Son (appellant in No. 830) and the Bondholders’ Committee (appellant in No. 831) have indicated that they intend to seek judicial review of the November 16 order. The trustees also suggest that the questions presented involve only the quantum of consideration to be paid by Penn-Central in implementation of its eventual *556take-over of the New Haven, and do not merit postponing consummation of the Penn-Central merger.
On the other hand, the bondholders contend that their objections to the Commission’s November 16 order are so substantial that even if they have only partial success on judicial review, the feasibility of inclusion would be open to serious question. If inclusion of the New Haven in the Penn-Central system could not be accomplished, a major underpinning in the Commission’s finding that the merger was in the public interest would be removed.9 The New Haven might then have to be liquidated in the reorganization court. Perhaps eventual operation by the Federal Government, or by the States concerned, would be the outcome. In fact, appellant in No. 831 has pending before the reorganization court a petition for immediate liquidation of the New Haven. The bondholders, of course, seek to recover as much of their investment as possible. To the extent that any loans from Penn-Central to the New Haven would not be offset by Penn-Central’s obligation to absorb a portion of the New Haven operating losses, the bondholders’ equity would be diluted.
The Commission is commanded by § 5 (2) (d) of the Act to authorize inclusion of a road only on “equitable terms.”10 Are the operating loss provisions, as they *557now stand, “equitable terms”? The provisions may well constitute a prelude to the slow bleeding or squeezing out of creditor interests, as their equity is diminished by loans.
High finance has a great inventive genius; and one does not have to be sophisticated to see how Penn-Central with the use of this loan device can pick up New Haven for a song.
The Commission has itself stated that the Penn-Central merger would not be in the public interest without the complete inclusion of the New Haven.11 Clearly we should not approve this merger and decide that the mandate of §5 (2)(b) has been fulfilled without at the same time concluding that the loan agreement and the sharing of the New Haven deficit are “equitable.”
On its face the requirement that Penn-Central share the operating losses of the New Haven on a decreasing scale each year — from 100% to 50% to 25% — seems inequitable. Why a 100-50-25 formula? Why not 100-10-1 or 50-25-10 or 25-50-100? The Commission does not clearly indicate how it arrived at its 100-50-25 formula. Of the two factors mentioned by it in making its determination (preventing endless litigation by New Haven creditors, and the inability to realize many economies during the interim period before the sale of New Haven's assets to Penn-Central), only the first would appear to have any relation to the adoption of a sliding-scale formula.
On its face this formula for sharing of losses seems inherently coercive. It would indeed appear that the *558Commission sought to force the creditors to accede to its proposal within a year. The pressure would indeed be great; for once the merger between Penn and Central is consummated, the New Haven creditors would have to absorb the losses of the New Haven at an increasing rate if they did not accept the Commission’s proposal.
If that is the purpose and effect of this provision concerning Penn-Central’s sharing of the operating losses of the New Haven, the issue may well have spent itself, unless we grant judicial review prior to the consummation of the merger. Of course, if the merger is approved, one way in which the coercive effect of this provision of the plan could be eliminated would be to undo the merger. But that gets back to the problem of unscrambling mergers of this kind and intricacy, once they are consummated — the difficulty emphasized by Mr. Justice Clark when the case was here before. 386 U. S. 372, 392.
The Court, while not presuming to approve the November 16, 1967, order of the Commission as prescribing “equitable terms” for inclusion, takes the position that the Commission has done all that is required at this point with respect to the inclusion of the New Haven. But I am unable to reconcile this position with the requirements of the statute, which directs in § 5 (2) (d) that a road may be included in another only upon “equitable terms.”
The coercive nature of the operating loss provision may well frustrate effective judicial review once the Penn-Central merger is a fact.
On the other hand, if the creditor interests do challenge the Commission’s order in the courts, and are successful, inclusion in the Penn-Central system on “equitable terms” at the time of that decision might well be impossible. The Commission itself seemed to recognize the possibility that the New Haven might not be included *559in the Penn-Central system in its November 16 report,12 although it evidently believed that the possibility of non-inclusion did not justify delaying consummation of the Penn-Central merger. Such an approach is not permissible under the statutory scheme, when the Commission has stated that the Penn-Central merger would not be in the public interest unless the New Haven were included in that merged system. And, as the bondholders have noted, there exists a substantial doubt whether the inclusion of the New Haven on equitable terms as required by § 5 (2) (d) has been provided.
Is such a coercive provision an “equitable” term within the meaning of § 5 (2) (d)? Is “equitable” to be taken to mean what is a “fair” distribution of losses, risks, and burdens between the old creditor interests and the acquiring company? These are old and perennial problems in the reorganization and merger field. They involve a delicate weighing of legal rights and practical realities. How we can approve the merger under the statutory system without determining whether the loan provision and the provision for sharing of losses are “equitable” remains a mystery.
11 TJ. S. C. § 205. See also 49 U. S. C. § 20b.
Pennsylvania Railroad Co.—Merger—New York Central Railroad Co., Finance Docket No. 21989, 331 I. C. C. 643, 653.
Id., at 653-654.
Id., at 112. With respect to the “wasting asset” doctrine in Chapter X proceedings, see, e. g., In re The Sire Plan, Inc., 332 F. 2d 497 (C. A. 2d Cir. 1964); In re V. Loewer's Gambrinus Brewery Co., Inc., 141 F. 2d 747 (C. A. 2d Cir. 1944).
By an order dated December 19, 1967, the reorganization court (D. C. Conn.) authorized the New Haven Trustees to issue up to $25,000,000 in trustees’ certificates to evidence any loans from Penn-Central obtained pursuant to the Commission’s November 16, 1967 order. The court ordered that each certificate issued was to constitute an expense of administration equal in priority to other expenses of administration; and that the proceeds derived by the Trustees from the issuance of the certificates could be expended by them for purposes deemed necessary within their discretion (including current maintenance and operation expenses), subject to the supervision of the court. The court provided that the Trustees would not be required to seek any further authorization to make borrowings under the Penn-Central loan agreement; but it directed them to notify the court and the other parties concerned when they intended to take down a loan, and reserved jurisdiction to modify its order with respect to any of these future borrowings.
331 I. C. C. 643, 704.
See id., at 717-720.
Id., at 719.
The Commission authorized the Penn-Central merger, subject to the express condition (Condition No. 8, in Appendix A to its Report and Order dated April 6, 1966, Pennsylvania Railroad Co.—Merger—New York Central Railroad Co., 327 I. C. C. 475, as modified in 328 I. C. C. 304 and 330 I. C. C. 328), that the merged system include the properties and operations of the New Haven. The Commission found that the merger would effectively destroy the ability of the New Haven to survive, and would not be in the public interest without the complete inclusion of the New Haven.
49 U. S. C. § 5 (2) (d). Section 5 (2) (b) authorizes acquisition of one carrier by another on terms which are “just and reasonable.” *557See, e. g., Schwabacher v. United States, 334 U. S. 182; Cleveland, C., C. & St. L. R. Co. v. Jackson, 22 F. 2d 509 (C. A. 6th Cir. 1927); Stott v. United States, 166 F. Supp. 851 (D. C. S. D. N. Y. 1958).
Pennsylvania Railroad Co.—Merger—New York Central Railroad Co., 327 I. C. C. 475, 524.
In its summary of the contingencies upon which the obligation of Penn-Central to loan $25,000,000 to the New Haven would be terminated, the Commission included: “If a regulatory authority or court by a final and effective order grants permission to liquidate the NH or to dispose of it to someone other than Penn-Central”; and “If it should be determined that Penn-Central shall not acquire the NH.”