The Portland daily press., 1885-09-28

But only suggest, and seeking information will
thank you to give me at the earliest day possible
your views of this important matter
Most respectfully yours,
j. w. DEERING, Mayor.
MIR. PUTNAM's REPLY.
PORTLAND Me-, Sept. 1885.
Hon. !. W. Deering, Mayor Of the city Of Port
Dear Sir.-Your esteemed favor of the 18th inst.
at hand. As counsel for the trustees under the
mortgage of the Portland & Ogdensburg Railroad
well as pleasure to furnish holders Of bonds se @
cured by that mortgage, and especially you as rep
resenting the city OF Portland, any information in
BY virtue of the foreclosure proceedings now
pending, the title of the road is expected to be-
come absolute in the trustees named on the 18th
of next November, subject only to the first mort
gage of S800000, the receivers certificates of
$250,000, and sundry small mortgages upon the
terminal property in Portland and Deering. If
this foreclosure proceeds to its ultimate result and
is not intercepted by some amicable arrangement
it will cut out and render valueless the stock of
the present corporation, all the unsecured debt
owing by it. and all the bonds issued by it jointly
with the Vermont corporations.
The total amount of bonds and debt liable to be
thus cut out with interest is probably over $780,
600. The further result will be, that as soon as
arrangements are made for liquidating the recev-
ers certificates, the trustees under the mortgage
will take possession and operate the road until
they are enabled to turn it over to the bondhod-
over as soon as the bondholders organize a corpo-
ration, as provided by the statutes which have
lately been passed in this State and in New Hamp-
shire.
Upon the organization of that corporation, all
the bonds and coupons securedby the mortgage
above named, will necessarily be converted into
stock. giving the new corporation capital of
about S4, 100000. property free from debt or in
eumbrance except the prior liens already spee-
fed.
The advantage of this form of organization
would be that the corporation will be strong. with
good credit, and able therefore to make arrange
ments for extending its line, if deemed prudent to
do so.
The city would retain the control of this corpo-
ration, as it would be the owner of majority of
its stock.
Your letter raises the question whether there is
any other method OF placing the property upon
sound financial basis.
At the request of some of the larger bondhold-
ers, lately made skeleton of scheme for re-
organization. preserving the present charter of
the corporation The possibility of such a scheme
was contemplated by the railroad commission ap-
pointed by Mayor Fessenden; and upon the sug-
gestion of that commission, legislation was OBJ
tanned in A. d., 1877. and in A. D., 1878, author
izng the city of Portland to unite upon such
terms as the council might approve, in plans for
reorganizing the Portland & Ogdensburg Railroad
Company, and authorizing the railroad corpora.
tion to issue stock to an amount not exceeding
$1,50O,000, to be denominated preferred stock
which the act says shall have preference over
the ordinary capital stock of the company and be
entitled to such dividends as the company may
earn, prior to the common stock, up to six per
cent per annum; and the act gives the holders of
the preferred stock the control of the company
until the company shall have paid upon it at least
two regular dividends.
Inc act turther provides that none OF the pre-
ferred stock shall be issued for any purpose other
than for iquidating Indebtedness existing prior to
jan l, A. D. 1878.
These schemes require substantially the assent
OF all the holdies of bonds secured by the mort
gage of Nov. /, 1871, and of bonds secured by the
subsequent s ZEN mortgage already spoken Of, and Of
require the consent of individual holders of the
common stock.
Under these schemes certain amount of the
preferred stock could be exchanged for the unse-
cured debt and the bonds be covered by the joint
mortgage spoken of. The balance of the pre-
ferred stock, with such an amodnt of bonds to be
covered by new mortgage as may be determined
upon, could be issued for taking up the bonds and
coupons secured by the mortgage of Nov. L, A.
d. 1871, and cancelling that mortgage, the pre-
ferred stock and new bonds to be divided pro rata
among the holders Of such bonds and coupons
The advantage of this scheme would be if sue
eessful that it would secure to the city and other
bondholders certain proportion Of new bonds,
which could not be jeopardiZed by any attempt to
extend the line and the city would still retain the
control of the corporation.
<, Preserving the present charter would also have
the incidental advantage of retaining the benefits
which it is claimed the present corporation pos
sesses, the exemption from the general railroad
tax of the State Of Maine, though the validity of
this claim is yet matter for judicial determina-
tion.
The scheme might or might not embrace a pro-
vision for completing the road by including in the
new mortgage SUFFICIENT bonds to be reserved for
that purpose; but there should be included in it
and reserved $500, 900 bonds to be used, if found
advisable, in liquidating the present mortgage of
the same amount when it becomes due.
The financial status of the corporation would be
1st The present mortgage of ssoo,ooo..
I'd. The receivers certificates of S250,00O, ex-
cept as liquidated; and perhaps provision could
be made for these in the new mortgage.
3rd; mortgage securing the amount deter
mined to be issued for taking up the present bonds
ton thereto to complete the road.
4th. Preferred stock not exceeding 81 100000
9th. The present common stock.
1t is not to be forgotten that this scheme leaves
all who have invested in the corporation hope
ahead; while re-organizng under the foreclosure
cuts out some entirely 1t is true that whenever
a3e a9ee besh f5d u Be bi SET b
perhaps these will now yield rather than lose
everything, and the body Of the unsecured credi-
tors ought not to suffer for the unreasonableness
of few, If it can be avoided.
My observation has been that schemes of re-or-
ganization which provide for every class of credi
tors and stock, ordinarily prove in the end more
satisfactory and fortunate than those which neces
sarily exclude portion of them.
OF course much labor would be required in OBJ
tanning the assent of all concerned, and the result
would be problematical. 1t would be more easily
accomplished If brought about before the twelfth
OF Novemberi but | presume would not be I'M
do not understand that the Trustees, or their
counsel, are called upon to urge upon you as rep
resenting the city, or upon any bondholder, the
choice as between the above methods of handling
the property; but they understand it to be their
duty to do all in their power for simplifying the
title of the property, setting it upon sound hnan-
cal basis, and turning it over to the bondholders,
or to whomsoever may be its owners, in a suitable
condition as soon as the law will permit this to be
done.
If / have not answered your questions with
sufficient defnteneSS, or If there are any other
matters with reference to which l can give you
| information, will cheerfuly respond further.
Very respectfully, your obedient servant,
| WILLIAM L. PUTNAM.
| 1t was voted that the correspondence be spread
| upon the records of the city.
Mr.. j. S. Kicker, of Deering, was called upon by
| the Mayor, and endorsed the suggestions made by
| Mr.. Putnam. He thought combination of inter-
ests would be to the advantage of the city and all
/ concerned.
The Mayor then read the following order
| In view of the communications which have
| passed between the Mayor and the attorney of the
| trustees under the mortgage OF the Portland &
| 0gdenSburg Railroad Company, and which have
been communicated to the City Council; be it
Ordered, That the committee on the reduction
of the public debt be- and it is hereby instructed
in connection with the stockholders, owners of the
floating debt, and holders of bonds issued jointly
with the Vermont corporations of the Portland &
| 0gdensburg Railroad Company to consider meas.
ures and devise means to reOrganiZe said corpora
tion upon such basis as not only to provide fol
the protection of every class of creditors stock
and bond holders but also, if possible, to secure
such cooperation as may be necessary with all in
terested, to bring about that result.
Said committee to report back TO the City Coun
Gil some definite plan at the earliest possible date
In explaining, the Mayor said his object was t
place this matter of debt before both boards ii
some definite form for action He then invited