The sun. [volume] (New York [N.Y.]) 1833-1916, 1898-02-14
-ur LAKE SHORE srooK SALE
,,,, week, stock market va. as full Of Incl

vat weeks stock market was a. Iuh OF lhei'
a., and as exciting az tho most seasoned oper-
~. could desire. 1t opened with n Hurry
80 bv fresh rumors Of an impending colits-
- n1,b svain over Cuba, which were intensi'
80 tor n little while, by the publication OF the
aos,,sb Minister'S indiscroet letter. The alarm
~ these sources having been quioted, prices
49, an inward turn because OF reports favor
VDVA g.o,ipg standard Oil certiicates, Metro
.o,itsn street Ilailway stock, Pullman Paiaco
p"S,ool, and Union Pacific and Kansas Pa
.iae certificates, assisted by tho announcement
o." diyidend of 100 per cent. on Adams Ex-
.,,ock.o sudden demand for Ions Island
p,Irnad. and by animated transactions In Lake
ssa.. Nav York Central. Manhattan. CONSOLE
su,oS Cos. Pennsylvania Railroad, and. In fact.
~" rh,,c speculative list. To what height tho
s.sr.jlipr craze will go and how long 1t will
-, I, uould be imprudent to hazard a guess.
Tho newspouer reports Of q proposed sale OF
80. shore hallway stock for New York Cen
- poi,roHd bonds, were followed, on WedneB-
- no n circular explaining the scheme, sent by
~. Now York Central TO the Lake Shore stock.
LoIdcra The New York Central offers to take
,hc sntjre crpital OF the Lake Shore, and to give
In orcbonge for every five shares OF II ono Sl,oOO
Iii bond tcarinS 3la per cent. interest, to run
a.. ,oo vcars and to be secured by the stock as
collateral. Tie Oder will DO kept open until
Anril ii. by which time tho Lake Shore stock
ho,ders must make up their minds whether
thew will keep their stock and take their chance
~ fnturc dividends on 1t. or accept q bond or
Tho New York Central. promising what is equal
IN per cent. per annum on the stock Tor the
neyt 100 years. The decision is not so easily
made ns might he supposed. and 1t embarrasses
,preat many Lake Shore stockholders.
The Vanderbilt family are said to be favorable
N the scheme, and to have promised 1t the sup
mort of their large holdings OF Lake Shore stock.
How ,be proposcd exchange OF stock for bonds
will be TO heir advantage. puzzles very sagacious
obscryers TO explain. The Lake Shore company,
far seven years, has paid dividends at the rate
NJ per cent, per annum, after deducting from
us gross earnings all running expenses, taxes,
additions 10 its road and rolling stock, and in
tercst at the rate Of z per cent. per annumo on
$4,000, 900 of funded debt. This, too, has been
accomplished with a business which has been
comparatively poor. but is now improving.
The road and rolling stock will not re-
ouire hereafter much extraordinary out
Law. and tho saving of interest by tho
pending conversion OF tho company's funded
debt will alone amount to Dig per cent. on
its capital. Everything, therefore. j~ustifes the
expectation tnat the ulFllcnus Ou tuc StOCh Can
soou he raised to 8 per cent. per annum or
more, and why its holders should surrender
this income, free of taxes under the law OF
this State. for ono OF 7 per cent, liable to q
taxation which will reduce II to nearly nothing,
requires sono argument to show.
The reason why the Vanderbilts favor the
scheme, is said by their friends to be, that they
prefer tho certainty of 7 per cent. for 100 years
10 the uncertainty of dividends. which, though
they may be 8 per cent. and over for a little
while, may be reduced to much less than z per
cent. long before 100 years have elapsed. They
are better acquainted than most people with
the railroad business, and more alive to
its vicissitudes and perils. They recall tho time
when the New York Central. now dividing but
4per cent. per annum. divided 6; when the New
York and New Haven. now dividing 8 per cent,
divided 10: when tho Union Pacific, since bank
rupt, paid 7 per cent, and n host of other
instances equally striking. Therefore, it is said.
they are wise in guarding against a like reduc-
tion Of dividends by the Lake Shore. Promising
as the prospects OF the company are now, a
season OF adversely may come, and then z per
cent. from the New York Central will be very
much more desirable than all that the Lake
shore property can earn.
Against this view Of the matter IL is to DO con-
Slderedt that the directors Of the New York Con-
trail Railroad Company, other than the Wander
bnts, are as well informed OF the chances and
changes OF the railroad business as they are, and
when they agree 10 purchase at 2 per cent. per
annum, for the next hundred years, tho net
earnings of the Lake Shore property, the expect
not only not 10 lose, but 10 gain something by it.
lfthey do not, they are more subservienJ to the
vanderbilt interests than Is compatible with
their duty to their other constituents among tho
New York Central stockholders. The Wander
bits themselves can hardly have had the au-
dacity to demand from their fellow directors
votes for a scheme which is to benefit them at
the expense OF their associates in the company.
ConcedinE. however, that the Vanderbilts are
right In forecasting a possible future shrinkage
In the earnings OF the Lake Shore property, they
ought also TO consider that such a shrinkage
vii! mob be confined to those earnings alone, but
viii extend to the earnings of tho New York
Central also. When the Lake Shore becomes
unable 10 earn z per cent. dividends on its cap
ital, will the New York Central be able to make
up the Deficiency Perhaps it will, II it has
no other demands to meet of the SANE kind.
Inc New York Central, however, has already,
besides the interest on Its funded debt and on
anese new bonds, a variety Of fixed charges upon
isincome. When this proposed Lake Shore con-
version shall have been completed the interest
and rentals the New York Central will nave as
suheu' VIII represent an immense amount of
principal. Here are the items:
New York Central R. r. mortgage. 800 600 600
: snofe H. H. mortgage 10000. 900
west Shore Terminal Co. mortgaze...... 10000, 900
hafiem II. II. stock and mortgage. ...... 2g, 600. 600
nome "atertown and ogdensburg stock
- "oF'saSe 2l. 900
80 u Neutrality-suspicious.. $4,000. 900
oonus. Old and new......... 100. 900, 900
1865. 600. 900
should the New York Central also purchase
III Nlchigan Central Railroad stock. which 1t
Is reported to be about to do. this enormous total
WIN DC further sweled by obligations represent.
ing Ss' 'ooO,OoO of principal. aud amount alto
ssther 10 Sl53, 900. 600. The interest on this sum
:" not shrink with tho shrinking e~arnings of
~ property 1t represents. land If these earnings
aIehotsuficient to pay it. the much priced guar
sn'ee OF the New York Central will DO largely
diminished in value.
'auSea by the course OF the market, the pro-
ponneFance OF public opinion is that the trans