This Day In Market History: Penn Central Bankruptcy

Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date.

What Happened? On this day in 1970, Penn Central filed for bankruptcy.

Where The Market Was: The Dow closed at 716.11. The S&P 500 traded at around 76.64.

What Else Was Going On In The World? In 1970, 43 nations signed the Nuclear Non-Proliferation Treaty aimed at preventing the further spread of nuclear weapons. Paul McCartney announced the official breakup of the Beatles. Average U.S. monthly rent was $140.

Massive Railroad Bankruptcy: The Penn Central Transportation Company was created in 1968 via a merger between the Pennsylvania and New York Central railroads. The Pennsylvania Railroad dated back to 1846, and the New York Central railroad dated back to 1853.

The year prior to the massive merger, both companies were profitable, but Penn Central immediately ran into problems. The first year following the merger, the combined company generated a net loss of $2.8 million. The following year, losses ballooned to $83 million. By 1970, net losses had grown to $325.8 million.

When the U.S. government refused to guarantee $200 million in emergency loans, Penn Central was forced to declare bankruptcy in June 1970. At the time, Penn Central was the sixth-largest corporation in the U.S. and its bankruptcy was the largest in American history.

Penn Central’s infamous failure remained the largest U.S. bankruptcy for more than 30 years until Enron eclipsed it in 2001.