Evening star., 1898-08-01
THE REORGANIZATION PLAN
Injunction Proceedings in B. and 0. Affairs
Attracting attention.
Views of Wel1-7nf0rmed Banker and
Member of the Committee Act
ing for Conplainahts.

carrying into enect its plan for the reor-
ganization of the Baltimore and Ohio Rail-
road Company, to which reference was
made in The Star of Saturday, has attract
ed much attention in financial and railroad
circles.
A member OF the committee which Is act
ing for the complainants Saturday told
Star reporter that the suit in behalf of the
preferred stockholders was not for the pur-
pose of delaying the reorganization Of the
property, to prevent being shut out pending
the decision Of the United States Supreme
Court. though it is admitted that should an
Injunction be granted there would be delay
in rehabiltating the system.
while the order of Judge Morris on the
petition for the injunction gives until Sep
TEMPER 70 for an answer, said the same
party, the answer will, however, likely be
filed in few days, as the reorganization
committee would gain in the event of either
decision by speedy termination of the
legal proceedings. The basis of the suit is
the alleged unfair terms which require Of
the stockholders heavy sacrifice. Each
share of the first preferred stock is to pay
heavy assessment of So, and in exchange
for the stock is given 52.2 per cent of new
preferred stock and 70 per cent of new
common stock.
Opposed From the Beginning.
This plan from the first met with op-
who claim that while the new preferred
stock might pay dividend, there are no
probabilities of the common stock paying
one for years. A compromise was impos-
sible while the state of Maryland, which
holds over 1000 shares of first preferred
stock, held aloof. 1t has, however joined
IN the opposition to the terms, there
seemed no desire on the part of the bond
holaing interests to hasten compromise,
and Is party to the suit for injunction.
IL the suit accompisheS anything 1t is
thought the fact that the state Is party
to 1t will have caused the concession. 1t is
not desirable to have the state unfriendy
to the baltimore and Ohio company, espe-
ciaily after reorganization. The main ar
gument Of the petition is that the reorgan-
ization plan Is unfavorable to the bond
holders and unjust to the holders of the
preferred stock, especially In the matter of
the time limit which Is imposed on the
holders Of the preferred stock.
"A favorable decision in the case now
pending before the United States Supreme
Court will, of course, favoraby influence
the suit of injunction. 1t appeared first
that holders of first preferred stock either
had to accept the terms of the reorganiza-
ton committee or be shut out altogether
1t Is not probable, however, that the court
will allow the holders to be wholly ex-
cluded, because while the Supreme Court
suit pends 1t is impossible to know the
status of their stock. Should the dissent
ing. stockholders succeed, by a favorable
decision of the court. in obtaining better
terms for reorganization, it is not thought
that the reorganfza ton committee will
treat the depositng stockholders less IA
vorably than those who refused to de-
posit.'
Opinion of a Banker.
A banker who is believed to be in SYM
pathy with the New York committee said:
LAS is already known, the holders of some
24,00O out of a total of 10000 shares of
Baltimore and Ohio first preferred stock
have elected to refuse the terms Of the
Baltimore and Ohio reorganization commit
tee and to rely upon the claims of priority
over the mortgages, through a possibility
of "a favorable decision in the case now
pending before the Supreme Court of the
United States. eestr
1T has been a very difficult matter to
advise the many holders of Baltimore ard
Ohio first preferred who have asked my
advice upon the subject whether they
should accept the terms offered under the
plan of reorganization-5211ap per cent in new
preferred and 20 per cent in new common,
upon payment of an assessment of 81 per
share-Or to hold out and rely on either
effecting better terms through cnnlpro-
mise or through enforcement by the courts
tanned. D.
There were two horns to the dilemma,
cne or the other of which had to be
grasped. The holder either had to accept
being shut out. That is. it appeared 50 on
the face of it. But while 1 hesitated 20 ad-
wise stockholders TO decline the proffered
terms. i am inclined to the opinion that the
courts will hardly permit the dissenting
stockholders 10 be divested OF their rights,
because, while the suit is pending and ,,n-
decided. it is impossible for them to deter
mine the status of their stock and there
fore conditions are such that il is ;mposs;-
ble for a shareholder 20 know what he
should do under the circumstances OF
course, this is sentiment only, and the un-
impressionable law might not SO con-
stlGe 1t.
"On the other hand, should the dissent
ing stockholders succeed in obtaining bet
ter terms, either through a compromise or
q favorable decision of the Supreme Court
it does not appear probable that tho man
ayers of the Baltimore and Ohio reorgan-
izatlon would treat the depositing share
holders less advantageously than those
who have refused to deposit, and thus OBJ
tain better terms.
The question of an enforceable lien is
very important. Even If the first preferred
stockholders can substantiate their claim
of a first lien upon the gross earnings this
"ou1d do them no good. as the Baltimore
and Ohio company will be sold under fore
closure Of the mortgages, so that there
Will be no gross earnings, and the Balti-
more and Ohio Railroad Company win
cease to exist.
1T will be necessary therefore. for the
first preferred stockholders 10 prove that
their stock is enforceable lien upon Inc
corpus OF the company, and having done
So they will have just lien upon the Dro
ceeds of the sale of the property, and will
receive par and interest for their stock
Stockholders Cannot Prevent.
1T is my opinion that the first preferred
stockholders cannot prevent the carving
out of the plan of reorganization, although
they may by injunction proceedings give
trouble and possibly cause delay. It is to
be hoped that further legal proceedings
may be rendered unnecessary by mutual
concessions. which will permit of a salts
factory compromise"
Until the receivers Of the Baltimore and
Ohio took the stand that they had no alI-
thority to pay a dividend on the first nre
ferred stock this stock regularly Maid q
per cent It was locked upon as excep-
tioEally strong security, owing to the he
lief generally shared that the stock was
a perpetual lien upon the gross receipts
of the company, and the obligation to pay
per cent annually was part of the con-
tract. The stock in consequence COM
manded a handsome 1premium and was
bought and held by trust estates and saw
irg gs institutions.
The total issue of this stock is g. 600. .OOo.
and the Johns Hopkins University owns
about $1,0O0.O0O. Itawas the refusal of the
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