The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1902-02-22

change in the Illinois constitution or
else it was impossible to organize the new
company in Illinois. ~
Why Iowa Was Chosen.
Being compelled to go outside Of
Illinois, the merger organizers viewed the
situation state by state, wherever the
Burlington system had lines Minnesota
Is engaged in a fight against the merger.
Public opinion in Minnesota is hostile,
and Minnesota has constitutional pro-
vision prohibiting the consolidation Of
| parallel and competing lines. These con-
ditions eliminated Minnesota from con-
sideration. Missouri laws and conditions
were considered, and it was determined
that Missouri, likewise, was impossible.
Wisconsin at present is in the throes of
a great agitation of taxation of corpora
lions and OF corporate domination OF
politics. La Toilette is governor and
represents the extreme anti-cOrporation
| sentiment. Consequently Wisconsin was
out Of consideration. Nebraska is a
demopopulistic state, not leaning toward
mergers, and therefore considered dan
gerous. Montana is fighting the merger;
SO are all the other states in which the
Burlington has mileage.
1t was found, then, that in considera
tion Of all these features of the situa-
ton, Iowa afforded the most inviting
ton. Examination of Iowa laws showed
two "defects'' from the standpoint of the
merger managers. One is the provisions
which have been made in the law for
many years, that no railroad shall issue
bonds in excess of two-thirds of the
capital stock unless the total bond issue
be under $4,000 per mile. The present
policy Of railroad financiers and especially
railroad consolidators is to issue bonds
instead of stock as largely as possible,
because bond, at low interest, will sell
at q high price, while stock is less in
demand. Therefore, these provisions Of
Iowa law would have to be amended so
that bonds could be issued to any amount
without regard to the proportion of stock.
! The Molsberry bill, now before the legis-
lature, known in the house as the Sweet
bill, and reported favorably in both
| branches, is designed to correct these
'defects" in the Iowa law.
| The other weakness of Iowa law is that
already referred to, limiting to adjoin-
| ing states the territory into which an
Iowa company may buy, lease or control
| other roads. The Burlington system has
! lines in many states which do not ad-
| Join Iowa; therefore, it Is necessary to
amend this provision. For that purpose
the Hubbard merger bill was introduced
and its passage is asked.
Controlled by Hill and Hartman.
| The Burlington Railway company. with
500, 900, 900 authorized capital, has issued
| practically none of its stock. 1t is con-
| trolled jointly by the Hill and Harr1-
man interests as result, OF the agree
ment reached by them: after the financial
battle of Blue Thursday had been fought
| to a draw and it became necessary Tor
| both sides to make concessions in order
| to compromise matters.
! It's only asset is its lease of the Bur-
lington railroad system. Under this lease
| it guarantees per cent interest on all
of the old shares of the Burlington sys-
TEN in every year; the other per cent
necessary to meet the charges ON the
Joint bonds which were issued in the pur-
chase of the stock Of the old Burlington
] railroad company must be paid by the
| Northern Pacific and Great Northern UNI
less it is earned by the railway company
| Just how much such a lease is worth as
an asset must be judged by the financial
world at large. Before the stock OF the
railway company can have any value at all
| it must earn and pay 8 per cent on all
the old shares of the Chicago. Burlington
| G. Quincy Railroad company, as that cor
| poration has never in any year paid above
| 6 per cent on it's shares. So it will be
seen that the earnings Of the system must
be tremendous before there will be any
surplus to be divided among stockholders
of the railway company.
| Yet this paper company besides assum-
ing these onerous responsibilities of such
lease and guaranty proposes also to lend
I its "credit'' to the subsidiary corpora
! lions which will he formed to build ex-
tensions of the Burlington system 1t will
guarantee bonds for them and will take
their stock; it will operate the Burling-
ton system, and it will, of course, make
every effort so to increase the earnings
Of that system as to meet all the charges
which have been guaranteed. The pros
poets for an early reduction Of rates GER
tainly cannot be conceived to be brilliant
when the property is just assuming an
addition Of about SO per cent to its divi-
dend charges. Yet this is the company
which is asking the Iowa legislature to
grant privileges and powers that it be-
! lieves could not be secured from any other
| Legislature.
| aFinancial Legerdemain."
| Thus the intimate relation of these two
pieces of proposed legislation to the plans
Of the merger organizers becomes appar-
Ior M, ct,p 81 hot