The Express.
London, England, 1863-03-26 00:00:00

DEBENTURE STOOK.

The decision of the select committee of the House
of Commons in favour of the West Hartlepool Har-
bour and Railway Bill has caused great consterna-
tion among the holders of debentures generally, af-
fecting, as it does, the stability of all stock of this
class. Everybodyknows the risks of joint stock enter-
prise, and thousands of investor are ready to incur
them, as shareholders, for the sake of the promised
success. Other investors, less adventurous, are
content to forego the prospect of large gains and
accept a fixed and limited interest fur their
money, foe the sake of the certainty
of returns. Hitherto it has been univer-
sally assumed in this country, that a loan on de-
bentures, secured by an act of the legigatme
on the property of a public company, was the
surest of all investments. Whatever else failed,
the faith of parliament could not fail. So we have
been accustomed to say and believe with almost
religious faith. Should, however, the bill, of
which a select committee of the House of COMIIIOIII
has just approved, become law, we shall have to
tionaadas whether the prevalent conviction ought
not to be numbered with exploded supentitinui.
This would be a vary serious remit.
tion of debts is of itself detestable, but re=
sanctioned by parliament would be a spectacle por-
tentous of confiscation end wide-ispreed ruin. As it
is imptardhlEtrUton,sanetica ese be given want
under mum we will briefly recapitulste
the particu of this West Hartlepool seandaL
By an act of parliament called the West Hartle-
pool Harbour sod Railway. Act, 1857, powers wee
given to the company to raise further capital to the
extent of 450,000 e. upon mortgage or bond, er by
the creation and issue ei stock to be called debar
tore stock, instead of, or in exchange for, all or
any part of the money they were so empowered to
raise upon mortgage or bond ; and "to vs:mates
to the stock so created a fixed interest payable half-
yearly," as therein mentioned, not exceeding five
per oent. per annum. By section Bit was enacted
that this debenture stock, and the interest
thereon, should be a charge upon the
generalsershares undertaking g tf, thean rayasiny,,, giserinto
all
terest
should have priority of payment over all interest or
dividends, or any other shares or stock, whether
ordivary or preference or guaranteed, and should
rank next to the interests payable on the mortgages
or bonds." llnder the provisions of this act the
company raised—upon debenture bonds, 164,6251 ;
upon debenture stock, at 44 per cent., 25,0001 ;
and upon debenture stock, at 5 per cent., 260,3751 ;
making a total of 450,0001, which was the full
amount they were empowered to borrnw.
What, then, are the rights of these debenture stock-
holders under this act of parliament 1 They contend
that the stock they hold was legally issued ; that
they purchased it upon the faith of the express
provisions of the act, which guarantees to them " a
fixed interest, payable half-yearly, with priority of
payment over all other shares or stock, and that
they should rank next to the interest payable upon
the said bonds," and that is the foundation of their
claim. They say they have not done or omitted to do
anything by which their legal claims have been
compromised, and it is not alleged that they have.
As debenture stockholders they had nothing
to do with the management or mismanagement
of the company, and had no votes and no power to
interfere even if they had desired to do so. But
this bill, sanctioned so far by a committee of the
House of Commons, repeals the act on the faith
of which they invested their money—deprives them
of their fixed and guaranteed rate of interest, and
their guaranteed priority of position ; and thus
confiscates at least 50 per cent. of their property,
and leaves them nothing but a tainted mid worth-
ies: security for the remainder. And why is this 1
The story is one of the most diareputable in. the
annals of joint-stock mismanagement. The old
directors of the company, in contravention of the
act of parliament, sod in exoess of the powers
delegated to them by its provisions, had illegally
issued bonds to the enormous amount of upwards
of two millions more than they were em-
powered to raise. The object of this bill is .to
legalise these illegal documents, and to cover the
delinquency of those by whom the wrong was com-
mitted at the expense and by the sacrifice of the
debenture stock holders. The preamble of the bill
says : " Whereas the borrowing powers of the com-
pany have been exceeded, and it is expedient that
the debenture debt of the company (that is, the
mass of fraudulently issued bonds) should be con-
' verted into stock"—and this committee of the
House of Commons echoes the preamble, and says
"it is expedient"—and the bill goes on to provide
that the rights of the debenture stockholders and the
stock they hold shall be extinguished ; that a new
stock, to be called a " First Preferential Stook,"
shall be substituted for their debenture stock,
bearing interest at 3 per cent., instead of the
guaranteed 5 per cent.; that instead of ranking next
after the legal bond debt of 164,8251, and having
priority of payment over all interests or dividends
on any other shares or stook, whether ordinary or
preference, or guaranteed, they shall take equal,
and no more than equal, rank with the two millions
of illegal bonds ; and shall, moreover, be dependent
even for their 3 per cent. interest upon the profits
of each separate year ; and " the deficiency o f one
year shall not be made good out of the profits of any
subsequent year, or out of any other funds of the
company."
Thus one set of directors having wronged the
bondholders, the present set of directors, who are
said to be mainly composed of those bondholders,
are seeking to indemnify themselves at the expense
of the stockholders, and parliament is called upon
to confirm the transaction.
Debenture stocks have hitherto been regarded
with favour and confidence by husbands and
fathers investing for the benefit of their wives and
children, by trustees under sett.ements and wills,
and by solicitors, bankers, and stockbrokers ad-
vising their respective clients as amongst the best
of securities, because they are accurately defined
and their rank guaranteed by the acts of parliament
under which they are crested. We cannot wonder,
therefore, at the consternation this event Las created
wherever it has been heard of. It is rightly fore-
seen that if this pernicious thing can I.e accom-
plished one year there is nothing to prevent its
being repeated in the next or some subsequent year,
and that if it can be successfully achieved by one
unsuccessful company, it may be, and will be, at-
tempted by many others.
This is a matter in which every debenture stock
and bond holder in the kingdom is interested, and
we shall be much mistaken if the universal protest
and condemnation with wkiob the attempt will be
met are not so3h as will defeat it and effectually
prevent its repetition.

THE lINENPLOTED COTTON OPERATIVES OP
Otasuow.—A meetiete taimployed soften operatives was
held on Tuesday for purpose of consideriog a memorial
to Lord Palmerston with referent* to their present con-
dition. A draft memorial, which had been previously pre-
pima, was unanimously adopted, and a deputation ap-
pointed to present the sane to the Premier on the 81st
to the side room of the City Hall, at the close of the
working men's aerie. The memorial, after vetting forth
the destitute condition of the unemployed ootten
operatives of Glasgow, and the insufficiency of the
pittance allowed them for the support of themselves
and families, goes oe to submit that the legisla-
ture should amend the poor-law of Scotland by raising a
permanent employ meat rate ; as oleo for the oullium
of
emirration to any of her Make!, 's ; that such
employment, emigration, and colonisation
.rate should be
raised OD a similar priumple to that of Lite mown.. tan, aid
be under the control cod manageomot o a board of cons-
missiosers chosen by the ratepayer., and fnperemed by the
goveroomot ; that such board should be empowered to pur-
chase land at home and abroad for the purpose.of clearieg,
cultivating. and improving it also to erect mutable dwel-
bop, workshops, factories. schools, and Owen( •sorslifp
for the colonies, the outlay oe which to be refunded by the
settlers to the board of supervision, and thereby increase
the means of further 'steadies productive employment,
and Lena emetics us the Mom era.