St. Paul daily globe., 1894-07-22

menC OF the Remainder OF the
Bonds-rerminalP Properties to
Be Included in the Mort
gage. -St
WASHINGTON, July 21.-Representa-
tive Reilly, of the committee OH Pacific
railways. made report to the public to-
day on the bill to adjust the debts of
the Central and Union Pacific railways.
A review of the legislation affecting the
roads from 1852 Is given in the report.
The purpose of the committee, it lis eX-
piained, is not only to devise some plan
that will insure payment of the govern
ment claims. but that would be final in
its operations and dissolve the compli-
Gated relations that have heretofore
existed between the government and
these companies. The bill is said to
differ from former bills contemplated.
the extension or funding of the entire
lndabtedness-the first mortgage as we'll
as the government debt-and applied
the amount i'll the sinking fund to
the credit of the companies OH their
Indebtedness to the government. 1t is
pointed out that both the first mortgage
bonds aud the government bonds bear
per cent interest, which the committee
believes it is and will be impossible for
the companies to meet, as it has been in
the past. Interest on the first mortgage
bonds has been paid regularly. but the
principal of the government bonds has
been more than doubled by the accumu u
latiOn Of interest in excess of all reim-
bursement, and 10 one expects the COM
panies to pay their debts to the govern
ment at maturity. Annual interest on
the first mortgage bonds has amounted
to over S2,000,00O year for the Union
Pacific and S1.6oO,oO0 for the Central
Pacific. and it seemed to the committee
that If the first mortgage was to be con-
tinued with
PRIORITY OF LIEN,
it would be futile to attempt all adjust
ment on that basis. Accordingly, the
committee directed their efforts to a
plan looking to the eXtinguishment of
the lien. and by the bill the amount in
the sinking fluid is applied to that pur-
pose, upon condition that the companies
shall provide Ill manner satisfactory
to the secretary of the treasury for the
payment OF the remainder of the bonds
and the discharge of the first mortgage,
giving the government first instead of
second lien on the property, DISPOSE
tion of the sinking fund considered
more advantageous to the United States
than its application as a credit on Its
own debt. The committee considers
the arrangement advantageous to both
parties; that it is within their ability
to comply with the provisions of
the bill. and thinks the compa-
nies will willingly comply if they
are disposed toward a settle
ment. The government must continue
to pay interest on the subsidy bonds
until their maturity. and the bill pro-
| yideS for the method of aScertaining the
amount due the government on theist
of January, 1895, and that bonds of the
companies to run fifty years shallcbe
| given for the amount, bearing 8 per
| cent interest, payable semi. .annually.
| with Semi-annual and gradually in-
creasing payments on the principal. E.
| The bill contemplateS setting the extent
! of the government lien, and includes in
| the mortgage the valuable terminal
! properties of the Union Pacific at Oma-
| la, Kansas City and other points. and
| estimated to be worth Sl5, 1000. .000.. There
are other provisions covering the paw
ment of dividends by the companies. so
| long as the United States shall own any
| bonds, for payment for transportation
services and for preserving other
RIGHTS OF THE UNITED STATES.
In case of default in respect 10 any
obligation for which any lien exists in
favor of the United States upon any
property of any other companies OF in
case of any proceedings brought by
I'M If arrr NfI fI,.1r fhn oft
general is authorized to enforce the
claim and foreclose any lien of the
United Statessby. sale or otherwise; and,
if by sale. the property shall be sold to
the highest bidder for a sum not less
than the amount of the debt due to the
United States, and all interest thereon
to the date of the confirmation of the
sale, aud the attorney general is au-
thoriZed to bid such amount in order to
protect the government. Purchasers and
their associates shall be invested with al |
the property and franchises upon con-
irmation of the sale by the court and
compliance Herewith, and upon filing a
certificate accepting the provisions of
the act, giving the name under which
the company is to be organized, naming
fifteen directors and making all laws
relating to government directors apply
to the reorganized company. The court
of appeals of the District of Columbia is
given jurisdiction over legal proceed
lngs.
Unless some adjustment is effected,
Mr.. Reilly's report concludes, foreclos-
ure seems Inevitable, and that might
involve the necessity of the government
being compelled, in order to protect
itself, to pay off the first mortgage,
tn ereby involving an additional outlay
of public money on the roads of over
S40.000,000 above the sinking fund.
which would m axe the aggregate of the
governments vestment about S17O.-
O00,0