The daily dispatch. [volume] (Richmond [Va.]) 1850-1884, 1878-07-18

the public councils. Any personal regard
I might haye for these gentlemen would not
and could not affect me il / were not per-
sonally cognizant OF their public worth,
services; and fidelity. l.. .. W.
The Atlantic, Mississippi and Ohio
RatIrOa 1.-THE Reorganization
Schemes.
Editors Dispatch: am glad to state that
the Dutch committee have lately introduced
n Reorganization scheme which trust may
be adopted in the place OF the one put Tor
ward By the English committee, which l
consider very Objectionable for the reasons
stated in the enclosed letter. The Dutch
scheme meets these objections, and be-
lieve if the English committee (of whom l
am member) consider only the interests
of the bondholders, they will make friends
with the Dutch and adopt their scheme, OF
alter their own in accordance Herewith.
lam yours, truly, j. L. HALE.
Anerley, near London, England.
July 5, 1878.
THE ATLANTIC. MISSISSIPPI AND OHIO RAUL
RoAD-THE E0RGANIzATION SCHEME.
70 the, Editor of the Money Market Reuieoo :
Sir,-As one OF the English committee
dissenting from the present Reorganization
scheme, I wish, with your permission, to
state my objections. :,
The scheme is not drawn so clearly as it
should be. Some OF the pbraseology en-
ployed is misleading, and obscures the fact
that this Reorganization scheme takes away
from the bondholder his former securities,
leaves him without any, and enables those
who NAV work the scheme to stop payment
of interest without beng Liable to be called
to account The casual reader OF this
scheme is thrown off his guard by the use
OF the words Purchasing Committee"
This " Purchasing Committee" is not SIM
ply what its name implies, a temporary
body formed for the purpose Of purchasing
the road. On the contrary, after careful
study OF the document, it comes out that
this .'Purclla>ing Committee Is pernd-
,.ent and irresponsible body formed for the
purpose OF exercising absolute and never
endin. control over the railroad and its
management, and it Is so protected by GER
tain clauses in the scheme that it cannot be
interiered With-not even il it ruins the
line and renders payment OF interest hope
less.
The reason why the bondholders cannot
interfere with the Purchasing Commit
tee" in the event OF wasteful or unwise
management, is that the Reorganization
scheme, in Article 4, takes away from the
bondholders the right OF foreclosure in
case OF default in payment OF interest. This
is very remarkable, because the power to
forcclose and take possession OF the line Is
the one only security bondholders OF Ameri-
can railways possess. In the case OF Eng
ish railways, acts OF Parliament so hedge
round directors that they are powerless to
i h11t with A narjpun rril-
ways directors can do what they like for q
time, until stopped by foreclosure proceed
ings. The 10th Article in this scheme
makes the "Purchasing Committee" ire
movable. The position Of the bondhold-
ers in relation to this Purchasing Com
mittee" is aggravated by the fact that it
consists OF only four members, OF whom
one is Il chairman having two votes, which
means practically that the Purchasing
Committee" will consist OF only two per-
sons, and these can possess this railway
400 miles long) entirely in their own hands.
to manage as they may think proper, with
out being amcnable to any one. The emf
nent American counsel, Judge Emott, thus
expresses himself in reference to part OF
this scheme g In all such matters in this
country two principles should be carefully
observed. In the first place, the p purchasing
Committee should, after performing the du-
ties imposed OH it in the foreclosure, purchase,
and reorganization, cease to exist, or at
least cease to have any relations with the new
corporation. Our laws, and think may add
sound principles OF railway management,
recognize, in the administration OF these
companies, only the stockholders and their
directors, and the creditors and their mort
gage trustees. There is no place for third
power, and the duties OF a purchasing COM
mittee are temporary, and what lawyers call
introductory in their character. In the
next place, in the particular case OF this
railroad, the control OF the new corpora
ton should be reserved by the sccond-mort-
gage bondhoiders, its purchasers and true
owners. ! perceive no objection to sccur-
ing the control by giving voting power to
the bonds. This IS Il very ordinary prac-
ticc, and need not prejudice the bondhold-
ers' rights as creditors"
It is not sufficient answer to the forcgo-
ing objections to say the " purchasing Com
mittec' consist Of honorable men, who VIII
not take undue advantage OF the peculiar
position they have created for themselves.
BondholderS, rs men OF business, ought
not to be asked to rely upon character alone
1t would not be prudent to accept any
mans character rs q substitute for mort
gage deed with provisions Of foreclosure.
1t is safer to be warned by the past history
OF American railroads and their mal-adnlin-
istration. The bondholders OF the Atlantic,
Mississippi and Ohio railroad should have
restored to them their two former
securities, which this re6ganiza ion
scheme takes away from them-namely,
the power to foreclose in case OF
default in payment of interest. and the
power OF calling the managers (now the
Purchasing Committed to account in case
OF any wrone-doing: and also, II the Pnr-
chasing Committee is to remain the perma-
nent and paramount authority, it ought TO
consist OF at least seven members, The cha1r-
man to vote only in the ordinary way. In
my opinion, if the scheme is not altered 1t
will destroy the market-value OF the bonds,
as the public will not buy them when they
understand they cannot foreclose in case OF
default. and are helpless against the man
agement. am, sir, DC,
A MEMBER OF THE ENGLISH COMMITTEE.