The morning news. [volume] (Savannah, Ga.) 1887-1900, 1891-09-10
THE CENTRAL's OBLIGATIONS.
Vice President Calhoun Explains

The following Is an extract from the con-
clusion of the speech of Hon. Pat Calhoun,
delivered before the special legislative COM
mittee considering the Berner bill, reported
in the Constitution:
A great deGl has been said about these
roads being watered, and the most reckless
Measurements ave been made. 1t is a
mistake. There is less water in the Termi-
nal system of roads than there is in almost
any system OF roads in the world.
As matter of fact the Terminal COM
many has caused q reduction in the capital
ization of the southern roads. There is less
outstanding to-day per mile on these roads
than there was four years ago How does
that happenl Much Of the stock and many
OF the bonds have been bought by the Ter
minal company at greatly deprecated
Urices and the hope of that company, the
hope Of its financial future, lies in the fact
that it can so build up this country that the
securities it owns can be made profitable
II the railroads whose stock it owns become
bankrupt, the Terminal company loses its
in 7estment. If it builds up this southern
country and takes care Of these roads, it
makes money. That is all of it.
Every dollar OF stock and bonds pur-
chased by the Terminal company, against
which it issues It's own securities, is in the
public mind charged twice. That is, both
the Terminal stock and the bonds and stock
it controls are charged against the proper
ties. That Is not fair. Taking every bond
outstanding taking every stock outstand-
ing including all Of the $4,000, 900 OF com.
mon stock of the Terminal company and
include all of the outstanding securities is-
sued by the East Tennessee under its reor-
ganization, and capitalization of the Termi-
nal system at its par value does not reach
S37 900 per mile.
In reply to a question from MIR. Berner
inQuiring about the Georgia company, Mr..
Calhoun said
am very glad the gentleman called my
attention TO the Georgia company. | will
now explain it, The Georgia company was
a mere method that those of US VINO owned
the Georgia Central stock individually
used, as explained to an investigating COM
mittee Of the last legislature, for the pur-
pose Of financing our purchase of the &C, 900
shares Of Central railroad stock. 1t cost us
in round figures about $1,000, coo. We
formed company and made a fifty-year
loan by an issue of "a 600. 900 of 5
per cent. bonds-just exactly as IL
l had 1000 shares Of stock individ-
ually and borrowed par on it at per cent.
for fifty years. The result of that trans
action financially was to leave the difference
between the dividend the Central paid and
the per cent. due on the bonds as profit to
the original buyers, which meant that If
the Central paid an 8 per cent. dividend the
) per cent. over and above the amount paid
on the bonds annually came TO the stock
holders. What was the result? You see 8
per cent on 100000 is 100000,
and per cent is 100000, leaving
to the stockholders of the Georgia com
pany 100000 Now, the stock was made
Sl2,OO0,00O. That $4,000 was l rer cent.
on that amount. Why Simply from the
fact that stock paying l per cent. divi-
dend would sell more readily at 20 and
above, than stock paying 5 per cent.
dividend would sell at par 1t in no way
affected the Central railroad, and the stock
holders OF the Georgia company could only
get on the Central railroad stock the same
dividend paid any other Central railroad
stakeholder When the Terminal company
bought the Georgia company stock, it only
sold securities to pay the actual cost in the
purchase Of the Georgia company stock.
My partner, Mr.. Spalding, suggests that
should state what is the fact, SO as to put
this matter forever at rest, in order that
there may be no doubt about it. The oapi-
talzation of the Georgia company in no
way affects the dividends that are paid by
the Central railroad, and the fact that the
Georgia company was capitalized at
Sl2,OOO,000, or at $20,000,000, does not cut
an item either in the liabilities or III the in
come of the Terminal company.
Now, returning to this question of CAPT
taliSation, the central group of roads lying
north of the Ohio river are capitalized at
SI2l,OOO mile. The southeastern group,
that Is, all the southeastern roads, at 81 L.
$50 mile. The Terminal was only capital
lied two years ago at $31 ,140 a mile, a less
capitalization than the average capitalize
ton OF the southeastern roads by 81, 900 q
mile. Remember this: the Terminal sys-
vs. TEN, including all of its own bonds and
stocks and oil the outstanding bonds and
sIocks OF its roads, although it has the most
M powerful system in the southeast, has an
# average capital outstanding of 81 900 q
# mile less than the average In this section
lake the Marietta and North Georgia as
# an Illustration. It's outstanding bonds
amount, in round figures, to $lS. OOO a mile,
ana Its stock to So, 600 a mile. making
S4oO0O mile of capitalization Run
Through the whole list of roads, aud you
ma tnat tho Terminal system has the small
# est capitalization of any important prop
erty In the whole country.
NOW, during the last two years there has
peen a further average reduction in the
capitalization in this system of roads. 1t
mas Deen estimated that il we could carry
OUT our plans we could have a consolidated
N system OF roads whose average bonded in
ueDtedness would not exceed $21 900 mile
una whose average stock Indebtedness
M would not exceed S12 600, making an aver
age Of S33 600 q mile.
put want to call YOUR attention to an
oeher proposition. The Terminal stock has
oeeh selling at from 10 to IA, whereas the
average price at which it was issued was
many fold greater. If You take the
prices at which the securities upon its
aUaus are selling to-day. and add them
ui up ana divide the same by the miles
"a ,oSu IN the system, with all its splen-
~ equipment, you will find that these
l &c a,6 are not selling to-day at an average
o%o,UVo mile. Think of it, 1928, 900 a
;nlIe would buy all the securities outsJand-
Is on THIS great system of roads, with all
tueir terminal facilities and oil their fine
~ Ii1plIent. And you hear demagogues
J a!N ABOUT their being an exorbitant
e ~ upon the people of this state in order
sto ne" from them dividends upon watered
roa 1a ~ orings US to this lease of the Central
coi.C, y tLe main object of attack, as | con-
I've ~ IN TINS whole contest What is iii
a.. .. .a 10 the Georgia Pacific road made
H., 'ne purpose OF opening up all this Sec
so Un ol country to the northwest and the
ouI1"est and tying the two sections to the
easa rnh, N closest commercial union; o
h WHICH, II the charters are viewed by
E. o|IcIesG possible construction, is
ro+o9 y authorized. What does it doi 1t
sto c ~. every dollar Of capital I'm this
Iehili4 vested In the Central system. Every
Indo. OF the Central railroad, whether
knSr5I Ease or under the bonds, is carefully
n sontb Egd ana protected by this lease. The
tannaI " TERN stock, the Augusta and Sa-