Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1874-05-08
RAILROkD SECURITIES.


RALLROkD SECURITIES.
TIE failure of so large a number of rail-
roads to fulAl their agreements is COM
mented upon by the press of the large
cities, in tone not very encouraging to
railroad enterprises or holders of securities
on lines moi we'll established. The Times
of New York says: previous to the tinan-
cial panic of September last. investment
in railroad securities seemed to be very
popular with the general public. but it is
doubtful if money can be so readily OBJ
tanned in future on such guarantees.
Hitherto, thousands have freely lent their
savings to construct new lines. or to COM
plete those partially constructed, and in
some instances money mas been given on
the security of roads which only existed
upon paper. Shrewd spectators found
no difficulty in swindling the public.
Prospectuses. filled with glowing accounts
Of the richness Of the country through
which the proposed lines were to run, were
scattered through the land and owing to
the exaggerated statements made therein.
and the inducements held out by offering
bonds considerably below par. many per-
sons inexperienced in railroad affairs were
induced to purchase bonds which have, in
numerous instances. proved perfectly
worthless. A large portion Of the money
thus obtained. it is needless to say, was
not honestly applied to the purposes for
which 1t was intended. but went into the
pockets Of the promoters" of the under
takings.
The recent failure of over seventy rail
road companies to meet their engage
ments has attracted considerable attention,
both in this country and in Europe and
the result is that no more money will be
lent on railroad bonds, except to those
lines which have already acquired a repu-
tation for stability. and whose earnings
show considerable surplus over expendi-
lures. Notwithstanding the failure of so
many companies to pay the interest on
their coupons, proceedings for foreclosure
have taken place only in few instances.
This forbearance on the part Of the credi-
tors is accounted for by the fact that in
most instances they would gain nothing
by foreclosure, since many of the roads
or parts of roads which the bonds repre-
sented never were of any value in them
selves, except when considered as part Of
a larger system. Bonds issued on n
branch line, or on feeder to larger one,
are in most cases perfectly worthless as
security for the investment. because if a
foreclosure takes place. the road cannot be
worked to advantage without the cooper
alton Of the main or trunk line, controlled
by the parties who issued the mortgage.
The main road may be able to meet its en-
gagements, but the branch or feeder can
not possibly do so without the cooperation
Of the parent line. Hence it will be as
difficult in future to dispose of bonds on
branch lines as ii will be to obtain money
for the construction of new main line
Among the roads which have failed to
pay the interest on their mortgage bonds
there are some which are independent in
themselves, and there is no good reason
why the bondholders should not take pos
session of them, aud work them for their
profit. The difficulty lies in the want of
cooperation, and the fear that matters
would, perhaps, go from bad to worse.
xrish hn Of oil
number of well-known lines, the railroad,
which are paying anything like IL fair div
idend to their shareholders are not numer-
Gus. and there is not much to encourage
bondholders to take deiaulting roads into
their own possession.
The panic has had at least one good eff
feet. 1t has made persons cautious before
investing in railroad securities, no matter
how good the road may be. Investors
now carefully avoid all bad and doubtful
roads, and will not have their bonds at any
price. II they were to judge Of the value
of certain railroad securities by the pric,
which the stocks bring at the Stock Ex
change, they would undoubtedly be ire
quenly very far astray. The true posi-
ton OF railroads cannot be judged by the
stock market AT the present moment il
Is well known that some stocks are really
worth more as an investment, than the
price at which they are quoted, while
others stand far above their value. There
are some OF very doubtful character,
which stand OF recently stood at nearly AS
high . figure as those of perfectly sol