Investor Group Ready to Make Bid for Conrail : Morgan Stanley & Co. Tells Congress of Plan

A group of investors is prepared to offer firm commitments to buy Conrail and keep it an independent railroad, a New York investment firm told members of Congress on Friday, adding a new wrinkle to the controversy over government plans to sell the corporation.

Representatives of Morgan Stanley & Co. said the firm would lead “a diverse group of responsible investors” in underwriting the purchase of Conrail. They said the group plans later to resell the freight railroad through a public stock offering.

Meanwhile, the Interstate Commerce Commission disclosed Friday that it had decided to examine the Reagan Administration proposal to sell Conrail to Norfolk Southern Corp., a move that irritated supporters of the sale who viewed it as an unnecessary delay.

The disclosure that Morgan Stanley had assembled a group of investors with cash to buy Conrail represented a significant development in the debate over whether the government should sell Conrail to Norfolk Southern.

Transportation Secretary Elizabeth Hanford Dole often has rejected a public stock offering of Conrail, partly because she has had no evidence that anyone was ready to come up with the cash.

Letters to Congressmen

Morgan Stanley’s proposal was conveyed in letters Friday to Sen. John Danforth (R-Mo.), chairman of the Senate Commerce Committee, and Rep. John Dingell (D-Mich.), whose House Energy and Commerce Committee is still considering the Conrail sale.

“We request that your committee give this proposal the same careful consideration that you will give to the Norfolk Southern offer,” Thomas A. Saunders, managing director of Morgan Stanley, wrote Dingell.

“The proposal reflects firm commitment letters from a diverse group of responsible investors . . . (and) is the strongest testimony to the economic viability of Conrail and to its future as a major independent rail carrier,” wrote Saunders.

No specific amount of money was mentioned in the letter. But Morgan Stanley officials in the past have said they were seeking to put together a group of investors that would match Norfolk Southern’s bid of $1.2 billion.

Earlier Friday, the ICC disclosed that it had voted a week ago, on a sharply split 4-3 vote, to examine aspects of the Conrail-Norfolk Southern merger and report to Congress by Aug. 2.

ICC spokesman Dennis Watson said the investigation will examine the impact of a Conrail-Norfolk Southern merger on diverting traffic from other railroads and whether a proposed track divestiture plan is viable and will keep competition alive.