Savannah morning news. [volume] (Savannah) 1868-1887, 1882-02-23

self Against Charges of Wishing to
Raise Ihe Market Value OF Central
stock at the Expense OF it's True
Value.
LOUISVILLE, KY., February l9-EdRor
Morning Ns1OS: Just as 1 am leaving home
for weeks absence, have received copy
of your paper of the 16;h inst. with your
editorial on the subject OF the Central
Railroad management.
Although l have but few moments
leisure, beg leave to acknowledge the fair
ness of your statement Of the situation, and
of the policy which have endeavored to
inaugurate. Your fairness is in marked
contrast to the temper with which l have
been criticised in some quarters.
You suggest that there is possibility Of
compromise between my views and those OF
the parties who have heretofore opposed
them on the common ground of larger cash
dividends, to be paid perhaps quarterly.
That is er0ythng that I haze desired TO see
done; and that not for the sake of a specu-
lation, but simply to place the Central Rail-
road stock on the basis of its true value
where 1t would have been ten years ago,
had its real merits ben understood.
Now, let us look for a moment at the
present situation, and see exactly what it is:
The Ocean Steamship Company have Gre
sted and executed and delivered to the
Central Railroad a certificate of interest for
81, SOC, 600, on which the Central Railroad is
entitled to receive z per cent. per annum
into its treasury, provided the steamship
nor fhaN
expenses, interest, taxes and marine or fire
losses for the year, and laying aside an
additional $l5O,000 annually for sinking
fund and reserve. This certificate of inter
est is practically nothing more than a regu-
lation of the company that the first $3.50, 900
net which 1t may earn during each year shall
be applied to a reserve fund. and anvexcess
above that, to the amount of $245, 900, shall
not be applied to the reserve fund, bu5 to a
dividend to 90 into the Central Railroad
treasury. The same thing could have
been done by a mere resolution OF the
board; but a mere resolution would not give
the same confidence to stockholders, as to
the permanence OF the policy, as that given
by putting it in the form of signed and seal
edinstrument. Moreover, this Instruments or
certificate, takes its place among the assets
of the Central r 4ilroad, and adds that much
10 the general credit of the company, which
mere resolution, adopting the policy,
could not do.
think, too, that the most conservative
critic must be satisfied that to devote as
large an amount as $4,000 per annum to
q surplus fund, and to make the surplus
fund the first charge upon the earnings of
the COMPANY, is amply cautious and con-
servative. But preferred to err, II at all,
on the side of caution.
That instrument has already been exc
cuted and turned over to the Central Rail-
road. l scarcely think that any legal pro-
ceeding can compel the Central Railroad
Company to destroy It.
| say frankly that when l first proposed
the creation of this certificate of interest by
thes steamship COMPANY l did not propose
hat the Southwestern Railroad should have
the benehs OF 1t unless they were so strictly
entitled to 1t under their contract that there
was no way to avoid giving It to them
Morally, do not think the Central is under
any obligation to give it to them, unless the
strict letter OF their contract re lures it, be-
cause for several years the Southwestern
received seV n per cent. dividends while the
Central received none.
Now, in considering how the thing could
best be done and give the Central lilFoad
the earnings OF the steamship company
without giving to the Southwestern, 1t was
at first suppose that an interest certificate
Of this form might be created bv the steam
buip COhlp9H1g dul Uy IL OOCI az u tOW DFtCe 10
the Central Railroad stockholders, but not to the
Southwestern. But close investiga alton into the
Central and the situation at last brOughtme
10 the conclusion that it was impractieable
to carry out this policy successfully for rea-
sons too lengthy to state in this connection
l. only remained, therefore, for the steam
ship company to create the certificate of In
terest and turn It over to the Central Rail-
road treasury, where 1t now rests
The question rON arfsne " hat ia thn host
thing to do with it Under the present
circumstances l am most decidedly of the
opinion that the best thing to do with It is
for the Central Railroad board not to Subdi-
eide H among their stockholders, for in that
case the Southwestern stockholders would
almost certainly participate ia the division
But l Think the Central Railroad board
should keep 1t intact, and pledge to the
stockholders that the income to be received
from 1t should be. in the first place, used
as guarantee fund TO assure to the Central
stockholders at least a 8 per cent. diusdsnd Dor
Gnnnna; which would give to the South
western dividend Of seven and two-tenths
per cent. Then tie board should further
assure the Central stockholders that
in ordinary years when the Central Railroad
proper earned 8 per cent. on the railroad
alone (which In my judgment It. will never
fail to do easily, then the $245, 900 received
from this sourcs shall be declared in an eTtrd
diszdend.
In short, this will be simply making the
steamship company guarantee a 9 per cent.
dividend on Central stock in bad wears.
when the Central fails to quite reach the
mark; and from IL to II per cent. In ordinary
years.
Now, Mr.. Eiitor, can there be any imagina-
bic concurrence of events which would
make the course which l have suggested
above detrimental 10 the least to the well
fare, stability or credit of either the steam
ship company or the railroad company? Ga
the contrary, does it not add to the credit of
the railroad company, and add to the value
OF every snare OF Central Railroad stock
Does 1t give to the Southwestern one dime
that the Central can avoid giving them
under the strictest construction of their con-
tract
cordially concur in the suggestion that
the dividends should be quarterly, If they
could be so under the charter of the compa-
ny. Mywhole wish has been to give the stock
It's utmost intrinsic value to the holders: and
appreciate that all holders, and specially |
the small holders and the poor ones, would |
much prefer to have their dividends quar-.
terlY than semi-annually. have not urged |
that heretofore, simply because l seemed to |
nave already more on hand than I could |
make the stockholders understand, or 1 |
would have had very much less opposition. /
fou very fairly remark that have rep |
utation at stake in this matter, which l |
would never dream of risking for q mere |
speculation. And think a little reflection /
will convince any one, moreover, that even |
as speculation the policy have pursued |
would turn out very badly If it were not |
financially sound and did not establish the |
Central Railroad ock on higher plane of |
credit and value in the estimation Of "the |
whole financial world, than 1t was when | |
undertook it. The idea that l proposed to |
give the stock a high market value at the |
expense OF its real value, as an investment. |
is so ridiculous and preposterous that have !
hardly been able to imagine that it was |
really credited by any one.
Respectfully yours,
=. P. ALEXANDER,