The sun. [volume] (New York [N.Y.]) 1833-1916, 1897-09-20
NEW YORK. August %. ~
Messrs. YER MILYE & COMPANY

NEW YORK. August %, 1892.
Messrs. VERMILYE & COMPANY
OBSERVATION-DISCLOSURES TO your request for In.
formation regarding the 81. 900. 900 First Mort.
gage IA Per Cent. sinking Fund Gold Bonds Of this
Company purchased by you. I would state as follows:
The Panama Railroad Company exists under per
petual and special charter. granted by the Lcsisla.
ture of the State OF New York on April I. lst0, and
covers powers TO operate steamship as we'll as rail.
road lines. under concessions from the Republic OF
Colombia, granted In 1850. and running TO A. D.
1905.
In 1867 this Company issued 81. 900. 900 sterling
Cs5. 900. 600 Thirty year = Per Cent. Mortgage
Bonds. which mature on october 10, 1897 Although
there vas no sinking.funl obligation which required
it to do so. tho Company, from motives OF prudence.
voluntarily set aside surplus earnings from time to
time for the purpose OF meeting these bonds at
maturity, and has thus reduced the balance. for
which provision Is to DO made. TO the comparatively
small sum Of GS87. 600 (say 81. ass. 900.
From the proceeds Of the sale Of the s1. 900. 900
new ala Per Cent. First Mortgage sinking FundGold
Bonds, and with securitie, and ca,h now IN hand
from surplus earnings, the Company win have
sufficient to retire tho outstanding sterling Mort
gage Bonds At Maturity. and leave a surplus Of about
$500 00
The new mortgage will constitute the only mort
gage Indebtedness OF the Company. and will be
secured by . nrst lien on all the railroad. steamships.
CONCESSIONS, rlRh3, irancllses, anu real and peFSOnA
property of the Company now owned or hereafter to
be acquired.
In accordance with the terms OF the MORTGAGE
securing the new Issue. the Company Is TO set aside
IN August Of each year $50. 900 in gold for the
redemption OF these bonds At the beat price at which
they can be obtained by the Trustees. and. II they
cannot be thus bought IN tho open market below
los and accrued interest. the Trustees are TO draw
that amount by lot at that price. and Pay the same
on the next interestdate.
After Ave years the Company IS entitled to redeem
on any interestdate any or all Of the outstanding
bonds by lot at iO5 and accrued interest.
Under the terms OF the concessions from the Repub-
Lie OF Colombia. this Company pays TO that govern
ment an annual subsidy OF G2e5. 600. and 1t also
pays to the Department OF Panama a subsidy OF
S.5. 900. making a total charge OF $3.50. 900 per
annum. These payments are in lieu Of all taxes and
other governmental charges.
At the request Of tho Colombian government, in
order TO capitalize for Its benefit the subsidy due for
twenty seven year,. this Company issued s~s.Ooo,-
600 Of bonds. OF which there are now outstanding
eI,ssa. 900. the remaining si.l5s.ooO having
been paid and cancelled by annual drawings.
These subsidy bonds referred to do not represent
any increased Indebtedness, aud are not secured by a
mortgage,
Out OF the subsidy due tho Government each year.
the interest on these last.named bonds is paid. and
the remainder Is used for the purpose OF drawing and
csncellins as many bonds as can be redeemed there-
with. In this way tho issue will be annually re-
duced. and wilt be retired before maturity. At the
expiration OF the twenty-seven years. in 1908. the
payment Of the annual subsidy direct 10 the Govern
ment Will be resumed.
The authorized issue OF the new al Per Cent. First
Mortgage Loan Is 50. 900. 900, of which Sc. OOO.-
900 are issued AT present. The remaining So. ooO.-
600 are held in trust. TO be issued only for better.
mcnts, improvements, or uew property acquired. and
Ike purposes As provided in the mortgage.
BY this reduction IN the principal. and also In tho
rate OF interest, the Company reduces It's annual aIe cd
charge over 500. OOO.
To meet the requirements Of the developing trafic
OF the Pacific Coast with the United States aud
Europe, and 10 abolish the system OF lighterage
service In the Bay OF Panama which has prevailed for
nearly nifty years. AMI To introduce the most i'm
proved methods Of loading. unloading. AMI handling
tranac. the Company has Contracted for the cOnstruc.
ton OF a great pier. harbor. and other like improve
ments and facilities In the Bay OF Panama, permit.
ting the loading aud unloading OF cargoes directly
from vessels 20 cars. These Improvements are now
under way. ami Will cost about 81. 900. 900.
The large saving in expenses OF operation o. direct
shipment over the lighteraye Involving double
handling Of rarEoes is self evident; while the In
crease in business from the shortening OF the voyage
at least seven days, freedom from delays, Interrupt
lions, and accidents. and genera! fertilization OF bust
ness. give assurance that the annual cash result
from these Improvements will be far in excess Of tn,
annual interest charge incurred thereby.
A Additions TO the Company's fleet Of steamers. tn,
establishment OF grain elevators and warehouse
on the LsthEnus. and other equally important i'm
provcments. arc also contemplated In the earl!
+. future. These latter additions and improvement
will involve an expenditure during the next few
) years OF about S7OO. 900.
The net earning, OF the Company for the past nv
, years have averaged sol Q. 1sI.6 B per annum. Tn
, years 1909. 1894, and 1898 were the years OF aEereI
, sive competition ~ this Company to secure an
! establish the nrm position II attained in 1898. Tn
net earnings for the year 1879 were SI.O85,
= 8O3. 68.
The net earnings for the first six months OF tn
0 current year arc G0I5, 8ds. rs. an increase OF ne
4 PROFIT OF 1917 per cent. over the correspondent
period OF last year
0 Deducting from tho earnings OF the past year tn
> subsidy of 81 SO. 900. there ia left s7S5, aO3. ga
against which the only hHcd charge OF the Compan
will be the Int, rest on the bonds sold you. amountin
o 10 500. 600 per annum aside from the sinking Fun
. Installmentli in other words. during the past year 81
Company earned over eight times the amount VI tb
) interest charge.
T The railroad and Its equipment. as we'll as Il
= steamships. tugs. lighters, and other property OF II
4 Company, have been brought to a high state
efficiency. and the property is now in better cond
tion than at any time during its corporate eTistenc
Y The Capital Stock Of the Company amounts
81, 900. 600.
k the Company. 1t has continued without cessation
" financial default.
Your5 very truly,
= siEuedj ). EDWARD
President.