The news & observer. [volume] (Raleigh, N.C.) 1894-current, 1901-01-11

! appertained 10 the old bonds; that the
| holders OF the second mortgage bonds
acquired them before the maturity OF
the first mortgage bonds and thereby
took the right to pay off the first mort
gage bonds a. their maturity and thar
! the mortgagor, the State, and the first
mortgages, could not lawfully enter
| into an agreement for the extension of
the first mortgage bonds without the
consent of the second mortgages; that
the holders of the second mortgage
bonds We're not parties To the agree
ment for the extension OF the first
mortgage bonds and enforce their own
lien against the States stock for the
payment of their own second mortgage
and SO they ask the State to waive it's
sovereign immunity from suit and sub
nit itself 20 the courts TO the end that
the rights Of the parties may be deter
mined, and they seek to show that f.
the courts should hold in their favor,
the State would not only pay off what
they claim is an honest debt, but would
also save very large amount of money
by being released from the obligation
TO pay six per cent. year on S2,720,000
for nineteen years when it can and
does borrow money for much less than
four per cent a year.
In the State Compromise Debt Law
of 1879, the second mortgage bonds
are scheduled at twenty-five cents on
the dollar Of the principal and they are
now fundablc in new four per cents. at
this rate.
If the State should submit this mat
ter to the courts. and the courts should
hold ia favor of the views of the sec
ond mortgage bond holders, and if these
second mortgage bond holders should
agree that in case the courts should
decree in their favor, they would sur
render their bonds by taking not more
than 100000 out OF the proceeds of the
sale of the States stock, it would re-
quire in round numbers about three
millions of dollars to pay off the two
mortgages. This would leave the State
still holding unincumbered stock worth
about two millions on the market. Or
the State by purchasing at the judicial
sale could retain all it's stock and bor-
row the three millions by the issue of
bonds at a very low rate of interest,
probably three and half per cent.
1t is to be remembered that these
first mortgage bonds are greatly priced
by their owners and demand high
prices on the market. Their value, of
course, is based upon the fact that the
collateral Or mortgaged stock is worth
nearly double the amount of the bonds
and the further fact that while money
on the best securities commands only
three per cent. these bonds call for six
per cent. for nineteen years. If the
General Assembly should tai 9 this mat
ter into consideration, it should also be
a subject OF inquiry as to whether in
the submission by the State to the
courts, there would be an element of
bad faith toward the first mortgage
bond holders who would perhaps con-
tend that. as the State in 1880 promised
to pay than six per cent until 1919, this
promise should be performed without
regard to the claim of the second mort
gage bond holders
1t is to De observed that If the Legis-
lature should decide to make available
for the common schools and colleges
and charities, this valuable asset of
the State-Its thirty thousand shares of
stock in The North Carolina Railroad
Company-or any part of it, there is
no way to 90 it, excapt by discnarging
the liens upon it, because with these
incumberances outstanding. purchasers
could not be found who would pay for
a share of this stock the same price as
that which they would pay for a share
of private stock.
MIN ,rT A AyU.Tr n