The sun. [volume] (New York [N.Y.]) 1833-1916, 1876-09-09

A favorite Investment with capitalists
for the last few years has been the stock
and bonds of railroad companies whose
roads are leased to other companies, and
which. therefore, have been looked upon
a. yielding a sure, If not n large, income.
But the recent heavy falling OF of the
profit- Of some Of the lessee corporations
has very justly excited suspicion and alarm
as 90 their ability to continue TO pay their
en- aud thus enable the leased lines TO
incot their own engagements. piece OF
property rented to a solvent tenant for
enough to pay taxes, repairs, and mortgage
interest, aud leave n handsome surplus, Is
one thing, while the same property in the
hands of tenant who Is on the brink of
ruin Is quite another. II he goes into
bankruptcy. the first thing his assignee
will probably do will be to surrender the
premises and let the landlord do what no
can with them. and so the apprehension
is that some of these railroad leases, now
so profitable TO their owners, may come to
like abrupt end, entailng a like cessa-
ton Of the income hitherto derived from
them.
conspicuous example OF the perils
that attend railroad leases is afforded by
the present condition of the Central Rail-
road OF New Jersey. When, In 1871, this
| company leased the Lehigh and Susque-
hanna Railroad and its appurtenances, its
| own business was very lucrative. its credit
| high, its dividends large, and its stock
above par. Consequently, the securities
OF the lines leased by 1t enjoyed degree
| OF favor equal to that OF the best State and
| city loans. The bonds Of the LehiGh and
wilkesbarre Coal Company, an affiliated
| corporation OF the Lehigh and Susque-
| hanna Railroad, were readily taken in
| May 1875, by the shareholders OF the New
| Jersey Central ut %. Now the Central
has stopped paying dividends, its shares
are below 80, its immediate bankruptcy
is apprehended, and as natural conse-
| quenoe, the securities dependent on its
leases have likewise depreciated the very
| bonds which only a year or so ago were
eagerly taken at e5, now selling nj G5 and
under. What has happened in this case Is
| also possible In several others.
| For example, the Delaware and Hudson
| Canal Company is the lessee OF the Albany
| and Susquehauna Railroad, the Rensselaer,
| and Saratoga Railroad, and the New 70 rk
| anu AIDtid bdils Ailt lui tt III hllhF ~
| continuous line from the Lackawanna coal
fields to Canada. The total amount of the
annual rental agreed 10 be paid for these
three lines il about e., 100, 900. while the net
income derived from them was last year
only &, 100 900, showing q loss OF 81 900, 900.
The capital and debt OF the Delaware aud
Hudson Company are $4,000, OOO, and here
tofore II has been able to pay interest and
dividends, besides meeting all its losses on
the leased lines. But, with the reduced
profits of both its coal aud transportation
business, IL IL question whether ii can
continue TO pay interest and rent, putting
dividends out Of consideration.
The Delaware and Lackawanna Railroad
Company leases the Morris and Essex Rail
road, the Oswego and Syracuse Railroad
aud several short lines in addition. Its loss
on the Morris aud Essex alone was last year
over 100000 and on the Oswego and
Syracuse, and other lines, $3.50, 900. Its OWE
capital is S26, 600, 0OO, and its debt $1,000, 900
Its profits have heretofore been ample tC
meet all its obligations, but whether they
: will be go in future remains 20 be seen.
The Michigan Central Railroad Company
I is loaded down with leases of the jackson
and Saginaw, Grand River Valley, anC
half a dozen other roads, amounting in til,
I aggregate to 5l9 miles, the annual los
} upon which is nearly Sl,00OOO0 and, will
interest on its own debt, absorbed las
. year nearly the entire net earnings OF tn
Michigan Central Company. This year i
I is expected the result Will be even worse
. aud the Michigan Central will actual,
have to borrow money TO moel "a deli
E cheney.
G There are other large leases OF railroad
IN existence, but as most OF them are, ever
nthcse hard times, profitable TO the lessees
6 they arc in no immediate danger. Tn
event to be apprehouded In the case O
. those We have above mentioned is eltho
( actual bankruptcy oil tho lessees, which O
I COURSE cancels tho leases. or threat q
= bankruptcy, which will bo used to mat,
/ rally reduce the rent agreed to be pai,
7, Already We know that tho Michigan Cen
y tral Railroad Company has embarked i
d litigation with the owners OF the Joliet an
II Northern Indiana road leased by II, aud
~ negotiating with those OF the Jackson All
Al Saginaw road for moro favorable term
"a based upon its alleged inability to con
y | ply with the existing contract. Tho n
* pudiation by the Pennsylvania Rairoa
a. | Company of IA obligations under IL