New-York tribune., 1894-03-16
AGAINST THE ERIE PLAN.
BONDHOLDERS SEEK LEGAL ADVICE AS
TO THEIR RIGHTS.
EVARTs. CHoATE & BEAMAN EXAMINE 1HE
SECOND MORTGAGE THEIR OPINION AZ 10
THE STATUS or BONDHoLDERs oPPoS-
ING THE REORGANTZATIoN SCHEME
no IMPAIRMENT OF RIGHTS

FROM NoN-AsSENT


Messrs. f. H. Hartman, Henry Budge John u j..
Emery and Sidney Webster. Protectve tom-
mItten of the Second Consolidated MortSage
Six Per cent Bonds. and certain other bonls 81
the New-York. Lake Erie and Western Kaliroai
Company.
Dear sirs: At your request we have examined
the mortgage OF the New-York Lake Erie ana
Western Railroad Company. hereinafter called the
Erie Company. made to the Farmers Loan and
Trust Company dated the 9TH day OF October 1873.
TO secure certain so-callel Prior Lien Six Per Cent
Bonds. and certain so-cIled Second Consolidated
Mortgage Six Per Cent Bonds which mortgage Is
hereinafter called the Second Consolidated Mort
gage. and we have also examined the circular
letter dated NewYork, January ., 1894. sent to
holders Of such bonds by the Board OF Directors Of
the Erie Company setting forth il so-cliled Plan
OF REORGANIZATION: and also a circular letter Of
the same date, sent to holders Of such bonds
by the bankers. Messrs. Drcxel. Morgan u CO.. OF
New-York and Messrs. J. s. Morgan CO.. OK
London recommending such plan. and inviting the
deposit with them Of bonds hereunder; and also
another circular letter dated March 9Th. 1891. from
the same bankers to the bon1holders. notifying
them that the plan OF reorganization has been de-
clarod operative and that holders OF Outstanding
bonds must deposit the same with them on or
before March 81 1891, at IL o'clock nooa. in order
to participate in such plan and that deposits after
that date II received. will be subject to such
penalties they may hereafter fix.
and other bondholdcrs invited to surrender
their Six Per cent Bonds secured by mortgage for
total issue OF about sWN0.c0 and in exchange
therefor 10 receive Five Per Cent Bonds for
the same amount. secured by a new mortgage. So
curing a total possible issue of E0.0o0cp provided
also that the deposting bondhoders at the same
time subscribe 80 for bonds under the same
mortgage 10 the extent OF about onequarter OF their
holdings.
This plan calls for concessions and payment Of
money by the bonlhoiders. and in this way
I; is expected will provide for existing floating
debts. trusts and other pressing Obligations.
bu, it calls for nothing from the stockholders cx-
cept give their consent 10 the bonds and
mortgage
The provisions OF the Second Consolidated Mort
gage are unusual III that they permit six sue
cesslve defaults in interest payments on the bonds
before the usual rights OF trustee TO forec.ose
can be avai.ei Of The plan Of reorganization pro-
poses thar he new mortgage shall requr- prompt
paymen, Of all coupons In cash. and give adequate
foreclosure rights in case OF any default
Whether the pan Of reorganization who.e
Is wise one for The hondhoilcrs - accept Is a
business question. and Is not herein considered by
by the terms Of the second Consolidated Mortgage
II Is. in opinion clear that the Er!e Company
cannot properly apply its earH.uss. nor cin a
Court properly do - through It's Receivers. to The
payment Of ANY interest on the bonds secured hy
the proposed NV mortgage unit. the bonds occurred
10y the present mortgage have been paid AL Interest
uuc thereon
1t Il proposed IN the plan Of rcorsanizltion that
the Second Consolliat-d and Funded coupon Bonds
which assent 10 tAe proposed plan VIII. when &C.
qured. be kept alive. and deposited with ~.
Trustee. 10 be held as long may De- necessary
FOR the protection ~ the ucw bonds" u % should
be determined bv court that the bonds SD de-
posted kept alive" then u may be that The
bonds 50 oJositcd may be entitled - receive l-
terest pro rata with the Second Consolidated Mort
gage Bonds that not - deposited but not other
at any earlier date. ana ~ the Interest Irii
on such deposited bonds may he G!visibl- pro rata
among all holders oi the proposed new bonds and
Il the proposed new bonds viii exceed the mouat
OF the Second Consolidated Mortgage Bonds de-
posted FOR eNchanee the result VIII he. "a our
opinion that in event can the holders % The
bonds receive r~a.ze any payment out of
interest that may be paid on the bonds deposited
ana kept alive without payment at the same time
by the Company u larger sum per bond - th"
holders Of The bonds that have not consented -
| the plan
II the deposl,ed bonds are kept alive" il may
be that the holders Of the new bonds 10y reason
o.: their interest IN such deposited bonds. viii be-"
entitled 10 share In the benefit Of the mortglse boy
which they are secured. but as IL Is contemplated
that the bonds VIII be- nearly double the
amount Of the deposited bonds the result Will be
/ that "A holder OF a new bond v II have much less
property security for his bond than will bc had
by the holder Of bond that has not been exchanged
for new bond.
We notice In the circular letter Of the bankers.
dated March 6th. that II Is stated that deposits or
outstanding bonds made with bankers after Marcn
3lst. 1894 ~ received" Will be subject such
penalties the bankers may hereafter fix. Of
course It will be In the power OF the bankers to
fix the terms which they will receive deposit "
bonds but it is not in our opinion. In the power of
the bankers. in the power OF the Erie Company
acting with the bankers TO fix any penalties or
terms which will IN way take away impair
the rights OF the holders Of the Second COnsOli lated
Mortgage Bonds - receive pro rata all interest
payments a. herenbcfOre stated. II may b. thdt
there is under the morte1ge no present existing
right To- foreciosc but until foreclosure does take
place the rights Of one bOndhoid'r cannot without
his consent made by the Erie Company or It's
bankers In way inferior To those of another
bondholder. and when that foreclosure does take
place. each bondhodcr VIII DE entitled To share pro
rata In the proceeds and benefits thereof 10 the eX
tent Of tho principal OF his bonds ani the dcfauei
coupons thereon. unless he mas himself consented
We also notice that i is proposed by the plan
posted hereunder. the coupon due December lSt.
@ viii viii be aowGa f ,ho FOR NEW IN gasn 6an5 simultaneously
In our opinion Court should not allow low ms to be
pays in full the coupon due December Ist 1893. on
all bonds that have not been deposited under the
We learn from YOU that at the meeting Of Stock
holders Of the Erie Company he'd at New YORK on
the issue of the new mortgage contemplated by the
plan secure the proposed issue of FOpDW" OF no
gage indebtedness OF the Erie Company IS about M@,
coo If the deposited SgGpnd oon,2ian,ca s,i lI,,
then the total mortgage Indebtedness OF the Ere
Company after h neT nas ofS would be-
about Ni3 VOOoo but II all the Second Cons nsolilaed
Mortgage Bonds were dep1sdtGd ahn famcr'ba ba ana
istlns would be about slo3Oo.co 200,
BY the laws Of New York. passed In iSe. in our
!