High Court again cancelled the bankruptcy of the indebted company Jindřichohradec Local Railways

11 December 2023

The High Court in Prague has cancelled the bankruptcy that the regional court in České Budějovice declared on the indebted company Jindřichohradecké místní dráhy (JHMD). The High Court has thus upheld the appeal filed by the company. The regional court must look again at a possible reorganisation of the company. This is shown in the insolvency register. This is the second time the High Court has annulled the bankruptcy, the first time was in September. JHMD has been bankrupt since last autumn and stopped operating trains on the narrow gauge line last October. According to the court, it owes CZK 360 million.

The regional court has repeatedly stated that the company’s reorganisation proposal is pursuing a dishonest agenda. “In an objectively permissible reorganisation, dishonest intent does not exclude the debtor from bankruptcy resolution by reorganisation. Regardless of whether the debtor files a reorganisation proposal pursuing a dishonest intention or does not file such a proposal at all, the creditors’ meeting may decide on the method of resolving the bankruptcy by reorganisation on a binding basis. The insolvency court will then be bound by such a decision. The insolvency court will examine the fairness of the proposal for reorganisation only if the meeting of creditors does not adopt any resolution,” said Jaroslav Zelenka, a judge of the High Court, in his reasoning. He further stated that the bankruptcy decision was premature.

The regional court said in the autumn that JHMD’s reorganisation proposal pursued a dishonest purpose. This was stated in September by Judge Zdeněk Strnad of České Budějovice, whose involvement in the case was previously challenged by JHMD.

Last October, JHMD stopped running trains on the narrow gauge line, and the South Bohemian Region and the Vysočina Region are providing alternative bus services there. Trains could start running again next summer, representatives of the carrier and the insolvency administrator said in October. JHMD has previously said it has no money to pay its debts. It argued that the Vysočina Region does not pay it a fee for using the transport route. The county rejects this, stating that it is following the valid contract.

Gepard Express and WTT have expressed interest in operating on the lines. The insolvency administrator David Jánošík is negotiating with both carriers. Jan Píšala, head of repairs at JHMD, told ČTK that one of the companies could buy JHMD. Swietelsky Rail CZ has also expressed interest in operating the lines, but not the transport itself.

JHMD could be sold for up to CZK 121 million. This is based on an expert opinion published in the insolvency register. The condition of the narrow-gauge railway in southern Bohemia and Vysočina is now inadequate for passenger transport, according to the expert opinion. The sale of the narrow-gauge tracks in southern Bohemia and Vysočina could bring up to CZK 370 million. Boris Čajánek, chairman of the JHMD board of directors, said this in response to the assessment. The sale of the company as a whole would damage creditors, he said. It is not possible to monetize the assets of the company, which is in bankruptcy, because the company has appealed against the decision. Jánošík said this in the insolvency register.

JHMD owns narrow gauge railways from Jindřichův Hradec to Obratan and Nová Bystřice. Operation on the Nové Bystřice line began on 1 November 1897. In the past years, the trains carried about 400,000 passengers annually. Two thirds of the lines are in South Bohemia. There are about 40 wagons and locomotives in sheds and yards, the court said in February. Two historic carriages, which do not belong to JHMD, were taken by the Club of Friends of the Jindřichův Hradec narrow gauge railway to a museum in Lužná near Rakovník.

Source: CTK
Photo: Jindřichohradecké místní dráhy

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