New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1897-12-05
Hnanriai.
The Financial World.


class The operation will save to the Rock
Island sum equal to one per cent on its stock
per anhum; out for railroad securities in gem
eral II establishes new and important prece-
dent.
Inc successful refunding Of the Lake Shore
Northwest and New-York Central bonds at 3x
per cent established new rate for the very gilt
edged class OF bonds the question afterwards
u ps oeterihihed was what could be done with
bonds coming next behind these. When the
Rock Island company proposed to refund IN
per cents, the price at which these bonds would
be taken In block-that is the Wholesalers
prlce-would furnish the test Of the marker
After some weeks Of negotiation with the
big houses. one Of these took The whole issus a.
99k. 1t was great surprise. The price wa.
higher than had seemed possible. Full credit
must be given to President Cable for his suc.
cessful negotiation. He has again proved him.
self good hand at a bargain. This is N.
second time he has sold big block OF his conn.
panys bonds at a price which surprised Wall
Street. Away back in the early 'SOs. he sold
the Extension 5s.. which now form part OF the
issues to be refunded. at price so high ac-
cording to the then ruling quotations for bonds
as TO much astonish the street. He contriyed II
SO well that as one OF the purchasers said after.
wards We went to him with our hats in our
hand to ask him to favor u.s." And ne did
Whatever may be ones opinion as to whether
President Gable or the Speyer syndicate. have
the best end OF this latest bargain the thing I,
done, tie price made: and all bonds of a like
class to the Rock Island As have a new and
higher standard OF market value set for them nv
virtue Of this contract. The effect on the bona
market was immediate and striking On m.
morning when the official announcement wa.
| Aouylf
| kinds OF bonds selling below par; and the
volume Of transactions in the first hour brok.
the record. The buying OF the Atchson 4s was
particularly large
The reasoning upon which this huvng NO.
based seems sound enough IL great bond
! house like Speyer's is willing TO buy wholesale
at 93A. expecting to retail at 103 or more bonds
| or the class OF the Rock Island As. then bonds
or a ike class now retailing ten points or more
teow par, are certain to advance. The big
contract for the one makes the price for the
others Let us see how the new Rock Island and
| some other bonds stand
| Inc hrst question to ask in seeking the value
OF a railroad security is what are your gross
earnings and what your fixed charges? The re-
lation between these is the surest possible test
1t Is the real tombstone. A conservative esti-
mate Of the gross earnings Of the Rock Island
| road for its current fiscal year (Which ends
March 3lso would put them at $20OOOOOO II
will probably more. but to be entirely
safe, we will say $20OOOOOO The present
charges for interest 81 800 OOO and for rem
tails. $S00.OOO total. 81. 100000. The refunding
| operation reduces the interest charges By half
million. which brings the total down to 49,
100000 This sum is IS per cent OF S2OOOOOOO
! That makes the bond a safe The Rock
Island usually reports about 20 per cent working
expenses: this gives 30 per cent net: 30 per cent
| Of $2O.OOO,O0O equals S6OO000O Consequently.
the company has on this years earnings. a sum
Of S6.OOO.OO out Of which TO pay its bonded in
terest and rentals. amounting to $36OO0O0. The
surplus goes to the stock. True, it will not save
the half million this fiscal year; but the figures
| given show the large margin OF safety for the
bond
| Take now another per cent bond-the Atchi-
son general mortgage now practically first
mortgage. The same conservative estimate
| which gives the Rock Island S2O0OOOOO gross
for its fiscal year. will give the Atchison (whose
fiscal year Ids June 30th). S36OOOOOO The in
terest and rental charges Of the Atchson foot
up $4,000 The interest on the adjustment
! bonds Is not included in this. for the reason that
the adjustments are at present an income bond
and the fact sought to be shown here is the
security Of the 4 per cents coming ahead. OF
$36OOO0O0 the sum OF s.. 100000 is II per cent
II IS per cent could be considered safe for the
Rock Island As. as shown above, Is per cent for
the Atchison is 3 per cent safer. The Atchison.
like the Rock Island. is worked for about 20 per
cent. II be considered sure at that Thirty
per cent Of $50. 900 900 is $40 500 900 Here then
we have just double the amount of the interest
and rental charges: the surplus S5.4OO.OOO being
available for interest the adjustment bonds
%. - Il, To-.
The plain fact therefore. is thar this fiscal
year the Atchison company will have Sl0.S0oo0
wherewith to pay obligatory interest and rental
charges OF S. 100000
II may be objected OF the Atchson as Of the
Rock Island any otheg road. that IL may not
always earn as much 1t will this year True
enough. Suppose. then. We assume the extrava-
CANT estimate that the gross earnings fell OF as
much as S6.WO.OOO. making the total for the year
$50 600 600 only the working expenses being still
kept up to 30 per cent. Thirty per cent OF $780,
600 900 equals 100000 In such a disastrous
year. Therefore, this great loss would repre-
sent. still have a surplus OF $3.600.OO0 over
and above the obligatory interest and rental
charges. Is 1t an exaggeration. in the face of
these indisputable facts. TO say that the Atchi-
son is just 10 the interest OF It's
general mortgage A. as the Government Is to
collect the money for the interest on its bonds?
And is 1t not equally sure that these bonds now
selling about 50. will go to par the public
comes to understand the facts of the case?
II the affairs OF the Union Pacific at this
time as fully settled they will be by the close
Of the year when the sale Of the Kansas Pacific
has been made. II would be possible to present
accurately the figures which would show the
security OF the new per cent bonds on that
system 1t may be said now in general terms
that those bonds are thoroughly SAFE and will
in time sell up 10 the standard Of any thoroughly
safe first mortgage per cent bond. which will
certainly not be below par. This will be dem
onstrated just as soon as the present transition
stage OF the companys affairs has passed. and