The Portland daily press., 1885-09-29

the entire road, franchise and property sub
lect to the liens of $1,050,000, already stated
and the city owns more than half the stock
tage Of this form of Organization, 4 saws Nj.
futnam, would be that the corporation will
| pc strong, with good credit and able there
lore tomake arrangements for extending its
line, II deemed prudent to do So The city
wonld retain the contrOl of this corporation,
as It would be the owner of majority of Its
stock" - - W
| With this simple and satisfactory result
already assured, satisfactory in all respects
| except that the value of the property so ac-
CURED by the, city may not be equal to %
| per cent. of the moneys which the city has
put into the road; and it is useless by any
| device to attempt to- get ,sfor the city more
| than the value of the moTtgaged property
with full knowledge on the part of the citi-
zens OF Portland, that this foreclosure has
been procured at an expense of many thou
sand dollars and that itlauiets and perfects
the title of the city to the extent of the full
value OF its mortgage interest; and, not only
that, but gives the city full control of the
management. OF the arailroads it is, not a
proposed as substitute for this foreclosure
and what is well denominated scheme
for waving the foreclosure altogether and
proceeding by universal consent under the
original charter of the p. 4 o. Railroad pre-
ciSely as Ii no foreclosure had ever taken
the whole of the original stock of the COM
pany amounting we suppose to two millions
dollars or more tbnt the amount we do mot
Know. all OF which stock isE finally eXtin-
gulshed and cancelled by the foreclosure
Other parties than the city have large inter
ests In this stock and to perpetuate these adj
verse lnterestsis the first direct result of
waving the foreclosure and proceeding
under the original charter by eommonAcon-
sent. Again, another effect Of the foreclos-
tn CHI
and some third mortgage bonds issued by
the Vermont division of the p. & 0, r. r.
Company in violation of the rights of the
Portland division, the bonds and the, debt
amounting, as Mr. Putnam says, 'to proba-
bonds and this unsecured debt have no
equity aseagainst the city's mortgage and
sh9q bsst pg st 81 Rad s9d pei e the city is
due to it, there is no. reason. for its being
generous to claims which are inferior to its
own mortgage. Yet it is proposed by this
new scheme to pay this $4,000 (Which prob
than that directly out of the city'sl in
terest in the railroad by issuing new pre-
ferred stock to the holders of these third
mortgage bonds and this, unsecured debt,
whose claims are absolutely barred by the
foreclosure. This payment must of course
come directly out of the value. of the city's
interest, because the receivers loan and the
first mortgage of $S00.000 must in any event
be paid in full. viii anybody give reason
why the city should procure this foreclosure
at great expense and, having secured by it
all the return for its loans which it can ever
get, should waive.it for the purpose of pay
ing out of the % per cent. which it may pos
sibly get, the sum Of $150, 900 or 100000 Of
claims which have no right until the city is
paid in full, and which it was the direct OBJ
ject and effect of the foreclosure to finally
eXtinguish.
But more than this. it is easy to see how
the proposed scheme can be so worked out as
to deprive the city of the controlling interest
which it has under the foreclosure: Having
issued the new preferred stock in the sum of
S1,500,000 pro rata to the second mortgage
bondholders and to the holders of the unse-
cured debt and of the third mortgage bonds
it is proposed to issue a new mortgage, and
in the proposed scheme there is an omission
to state the amount for which this proposed
new mortgage is to be issued. sUn1er these
schemes certain amount of preferred stock
could be exchanged for the unsecured debt
and the bonds covered by the joint mortgage
spoken of. The balance of the preferred
stock, with such an amount of bonds to be
covered by anew mertgage-as- may be de-
termined upon, could be issued for taking
up the bonds and coupons secured by the
mortgage of November l, 1881 City merit
gage, and cancelling that mortgage, the pre-
ferredIstock and bonds to be divided pro rata
among the holders of such bonds and cou-
pons" i.ltr-, ~ 80. r.
Now, if this proposed new mortgage and
the preferred stock were-~t be issued pro
rata to the holders of the second mortgage
bonds only, the present relative proportions
would be preserved in the ownership of the
preferred stock and the new mortgage bonds,
and the city would still retain its controlling
interest; but when this preferred stock is
issued to others than the holders of the sec
ond mortgage bonds, as for instance, as the
scheme proposes, to the holders of the third
mortgage bonds and the unsecar debt the
proportion of the citys holding of the pre-
ferred stock to the sum of the adverse hold
ing is diminished, and it will require but
little perfection of the scheme to reduce
minor interest and place the control of the
road in the hands of the other holders. 70
But the scheme proposes not only to issue
preferred stock to those who are entitled to
nothing under the foreclosure, but it further
proposes to make theanew mortgage sufi7
Gent in amount to pay the first mortgage
debt of 100000 and 'the scheme might OF
might not embrace provision for gomplet-
ing the road by including in the new mort
gage sufficient bonds to be reserved for that
purpose &
Now, if this new mortgage IS to be made
sufficient not only to serve the lawful and
rightful purpose of giving to each sec
oad mortgage bondholder sHcha proportion
of the new mortgage bonds as would fairly
represent the value OF his stock under the
foreclosure but is also to be made sufficient
to pay the 100000 mortgage, and to provide
funds for extending the railroad, who is to
become the holder of these new bonds which
are issuedto pay the $So0se00 mortgage and
of the railroad? Unless the city itself buys
these new bonds which are issued to pay the
first mortgage and also buys the bonds which
are issued to extend the road, it will have
eeasedgt9 be- the controlling owner'of the
scheme includes two methods in which the
slight majority of interest now owned by the
city may be eXtinguished, and the city find
itself suddenly gsiMply holder OF a minority
interest in the stock and bonds of the P. & O.
Railroad Company. If the issue of prefer
red stock to the unsecured debtors and third
mortgage bondholders shall not be sufficient
to'make the city'S interest asminority4
est as against all the other hOlders-of the
preferred stock (whe control the road then it
is clear that under this proposed scheme the
city must either hire more money, which is
practically impossible, and buy the majority
OF the bonds which are issued t02pay the
$S00000 mortgage ~and majority. al the
bonds which are issued to extend the road,
or else the city must be content to become a
minority holder OF the bonds of the p & O.
Railroad Company, subject, to be deprived of
all voice in the control and management of
the road whenever (asis very likely to hap
PEN these new bondholders shall take pos
session.
The city is simply second mortgage of
the P. & 0. Railroad. Its position is like
that of any other second MORTGAGE Of real
or personal property who has perfected its
title to the mortgaged estate subject to prior
liens. Together with its associate second
mortgage bondholders it now ewnS the road
with only these two liens uponit. 1t is to
have full control lin the management of the
road. 1t must be content to take what there
is left of the mOrtgaged property in return
for the large loans which it made to this rail-
road company No device OF scheme can
give it more than this. Do the City Council
or the citizens of Portland desire in place of
the simple and effective. and rightful proceed
ure by foreclosure, which has already cost
them SO much money, and which at great la
Dor and expense has been perfected by the
trustees, to substitute a scheme which pro-
poses to perpetuate all the adverse holdings
of the old stock, to pay sum probably
larger than S150,000," upon claims which are
absolutely barred by the foreclosure, and
which in two ways at least directly endanA
gers the city's superiority of right in the
management and control of the railroad.
There is nothing to indicate that this
scheme has the approval of the trustees or
Mr.. Putnam. Ii the latter believed it to be
for the interests of the city he would be very
/ likely to say so. AS one citizen, interested
|, in the development of this railroad, and the
protection of the city's supremacy in the
same, protest against the scheme which is
being worked up, and by which the interests
Of the city will finally be jeopardized. We
have had enough of haSty action in the man
af into