The sun. [volume] (New York [N.Y.]) 1833-1916, 1896-03-17

March 10.

problems In corporation financing that has taxed
the patience Of security holders, the ingenuity
OF lawyers, and the Intelligence and resources OF
bankers IN these days OF enormous railway sya-
tens, with their manifold complications, which
are not appreciated until efforts arc made
to disentangle them. The problem may
be briefly stated as follows: 4 railway
system OF 4.706 miles, n land grant OF $4,000
900 acres, sundry securities and accounts rep
resenting interests In It's subordinate compa-
MES, making n property represented by nfty-fOur
separate corporations that had issued $3.50. 600
900 Of securities, OF which S272. 600, 600 arc in
the hands OF the public, upon which the annual
fixed charges amount to S1O,p05,6 800, and TO
meet which the property earned during the
fiscal year ending June 80 last SG.0l5.s46. The
solution OF the problem was further embarrassed
by the fact that during the five years ending
June 80 last, which period includes three fairly
prosperous years for the Northern Pacific Com
pany, the average annual net earnings Of
the system were 80, 100. 600 less than tho
amount required TO pay fixed charges thrt
haG been saddled upon the property
by a reckless, INSCRIPTIONS and thoroughly
dishonest management, in which the controlling
spirit was one who has now sunk into merited
oblivion. Consideration for that which has
passed beyond the possibility of resurrection
precludes further reference to the offensive
memory OF the wrecker Of the Northern Pacific
property at this time. when thousands are suf-
fering in consequence Of the confidence they
were led 10 rcposc In him.
According to as accurate a compilation as is
possible, the securities OF the Northern Pacific
system are held by nearly 10000 actual owners,
and the market value OF those securities in
the aggregate is many millions Of dollars
less than the prices originally paid for
them. To preserve the enormous property re-
ferred to from disintegration and further
spoliation many millions of Indebtedness
have been incurred. and in addition it has
been carefully estimated that $4,000. 900
are required to place the property on an equal
footing with its rivals for economical operation.
The rehabilitation of the Northern Pacific sys-
tenn has been further complicated by
the perfectly natural efforts of various
classes OF security bolders to protect and
advance their special interests. and also by I'M
seemly disputes for temporary control of tho
property. to which. most unfortunately. the
Federal courts have been parties. The
first step toward the solution Of these most
intricate questions was undertaken by the
representative in Berlin of the large foreign
holdings of Northern Pacific securities,
which had been grossly misrepresented. II
not absolutely betrayed by its agent in this
country. For two years and a half II new repre-
OF the Deutsche Bank has devoted him
self without reservation to the study of reclaim
ing and building up n substantial structure from
the deplorable transcontinental wreck of 1898.
slow and tedious processes the exact situation
and the possibilities of recuperation have been
made plain to the larger holders Of Northern
Pacific securities. until at last the repre-
OF a majority of each creditor
interest have united in approving the
plan Of reorganization which was submit
ted to the public this morning. backed
by S45. 600. 900 of capital for its execution. and
also by the executive ability and influence of
the largest banking houses In this country and
Europe.
The plan of reorganization. a synopsis of
which is printed in an adjoining column. is
unquestionably drastic In some respects, but
its fairness is attested by the representa-
tlves of every class Of securities compul-
sorily affected by it. Even more than that
can be said for It. since the Berlin
representing German holdings of tie general
first mortgage bonds of the company
formally decided to-day to recommend
the acceptance by its constituents of the
terms Of conversion proposed in tho plan OF re-
organization. The plan accomplishes, in brief
a reduction of 441e q cent. In the annual fixed
charges of the company to S6,O52, $50. The
amount required for dividends upon the pre-
ferred stock Is increased 25A T. cent. max
ing the total amount to be paid prior to
dividends upon the common stock Ss,952, $50,
a decrease. as compared with the interest and
dividend charges of the present company, of
34A q cent. The policy OF the reorganization is
to reduce the classes of securities upon the entire
system to four issues. two OF bonds and two of
stocks. This cannot be absolutely accomplished
for some years to come: still. 1t is confidently
believed that the voluntary conversion OF bonds
not in default will take place to an extent that
will reduce fixed charges to an amount safely
within the earning capacity OF tho rehabilitnted
The lines upon which the reorganization has
been formulated may be briefly stated as fol-
lows: The Abandonment OF Chicago as tho
Eastern terminus OF the system and the limita-
ton of the railway on the East to the Mississippi
River and the great lakes. the ultimate con-
of the main line. branches and
terminal properties in a single company, the re-
of fixed charges to less than the mini
mum earnings under probable conditions. and
finally ample provision for additional capital for
the development of the property and for in
creased facilities necessitated by the growth of
the company's business. Ofthe amount required
for this last purpose the stockholders are called
upon to furnish SlO,S74,0T4, for which they
will properly receive no new security. The
amount OF cash they are called upon to supply,
IL they wish to retain their interest in the
property, is obviously much smaller than
the sacrifices that the majority in interest
of their creditors have been compelled to make,
owing to the Indifference or ignorance of those
who controlled the company down to the time
those creditors wero obliged to seek the pro-
lection OF the courts.
The stockholders are entitled to no sympathy,
but are rather to be congratulated that in spite
of their own shortcomings efforts that promise
TO be successful are making to preserve
the integrity OF the system and place
II upon a sound financial basis. A remarkable
circumstance attends the submission OF the
plan to the public, namely, that the percentage
of creditors who have accepted II is sufficiently
large to warrant the declaration that the plan
is operative. IL appears, therefore, that rs
foreclosure proceedings under the second, third,
and consolidated mortgages are well advanced.
the execution of the plan need bo delayed
only by the extension of a reasonable period to
minority bondhOlders and to tho entire body OF
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