The herald., 1894-02-07
SADDLING IT ON POSTERITY
The Central Pacific Reorgani-
zatiOn Scheme.
Huntington Draws Up a Bill to Fit
the Case.
The Government to Guarantee Bonds to
Run Over a Period of 125 Years.
A Synopsis of the
Measure.

By the Associated Pressl
WASHINGTON. Feb. 6.-The plan for
the reorganization of the Central Pacific,
PaciSc railroads today by 9. P. Hunt
ington, looks to the funding of the in
debtedness of that company and the
issue OF bonds, the payment of which is
to be guaranteed by the government Of
the United States.
Huntington submitted the proposition
in the shape OF bill to be introduced in
congress, and also made a statement in
explanation OF the proposition. The
bill is very elaborate one. In brief it
provides for the issuance of bonds of
$1,000 each, amounting to 1884 600, 900, to
bear % per cent interest and run 125
years or less time, at the option OF the
company; payment OF the principal and
interest OF the bonds to be approved and
guaranteed by the government on con-
dition that the railroad company shall
mortgage its entire property, including
its interest in branch and auxiliary
lines, to the government, as we'll as the
present lease to the Southern Pacific
Railroad company, which mortgage is
to be held as security for the pay ment OF
the bonds guaranteed by the govern
ment; stipulated, however, that the
mortgage of the government is to be
subject to any prior liens, and it is not
to be construed so as to prevent the rail-
road company from devoting the pro-
ceeds from the lease to the Southern
Pacific company to the payment OF
dividends to stockholders. The COM
pany is also to be allowed to sell any
land grants for the satisfaction of prior
mortgages.
Provision is made for the Issuing of
$27 1888, 900 bonds, which shall be dollar
for dollar in exchange for first mortgage
bonds of the Central Pacific or Western
Pacific companies, and to which the lien
of the United States issued to those COM
panies ia expressly subordinatsd. The
bonds received in exchange for the bonds
issued under the bill, are to be held as
collateral security in the treasury. the
old bonds to be designated United States
subsidy bonds, and when they mature
the secretary Of the treasury shall cover
into the treasury an amount OF new
bonds equal to the maturing bonds, Sim
liar bonds to be issued to the amount of
$40, 000, 900 in exchange for the bonds of
the California and Oregon railway and
Southern Pacific railroad, and disposed
of in the same manner as above stated.
The old bonds shall be cancelled unless
the Central Pacific should desire to keep
them alive for the security of the new
bonds, and the secretary should assent
to 80 doing. The old bonds which are
deposited and the coupons shall not be
paid unless under decree of foreclosure
OF the mortgage securing them. but such
decree shall not be issued unless in de-
fault OF payments OF interest on bonds of
this act continuing six months.
Provision ia made for the redemption
of the new bonds commencing the first
of July, 1896. by depositing for cancella-
ton 81, Csc, 900, and continuing at this
rate for rs years; for 20 years after July
!, 1920, 1915, 900 in bonds shall annually
be presented for cancellation; for rs
years after July /. 1915. $4,000 shall
be cancelled yearly; for rs years, begin
ming in 1870, 1925, 900 per annum shall
be cancelled, and for 25 years beginning
in 1892, Qne-twenty-fifth of the bonds
outstanding shall be cancelled yearly.
One sectian of the bill provides that
as long as any bonds of this act remain
outstanding, no dividends shall be paid
by the company unless the company mas
earned such dividends over all interest
and matured indebtedness. When a
dividend in excess of per cent is paid,
an equal amount above per cent shall
be applied to the purchase and cancel
lation of bonds held in the treasury.
The act shall take effect upon the
acceptance of its terms by the board of
directors.
The president is authorized to direct
the sale of the old bonds held in the
treasury. The bonds issued under this
bill may be deposited as the basis Of
circulating notes. The bill provides for
the repeal OF the laws Withholding
money from the Pacific roads and its
branches also laws forbidding the COM
psnies to mortgage property and allow
ing them to borrow money. 1t is made
the duty of the attorney general to en-
force the law.