New-York tribune., 1902-04-26
THE 7. S. STEEL BOND PLAN
CRITICISM OF THE SUBSTITUTION FOX
PART OF THE PREFERRED STOCK.


roratfon issued yesterday the long expected circular
TO the stockholders explaining in detail the reasons
for the proposed retirement of S2Vo,eo0ev OF pre-
terred stock and issuance of S25000ooGo per cent
bonds. and requesting proxies for use at the STOCK
holders meeting May 19, when these recon-
nnendations of the board Of directors Will be voted
upon
The policy of the management in proposing the
substitution bonds for two-fths of the preferred
been widely criticised. on the ground t!at
the addition of S1OU0O00 a year the fixed charges
would weaken the position OF the remaining prefer
ence shares and would be even more preJudlclal TO
the position of the common stock and 1t mas peen
the view of many investors that the issue OF the
additional s50OoDO00 bonds is ill-advised. as the
extraordinary expenditures to which the proceeds
of these bonds to be applied could have Deen
by deferrng for two three years the declara-
tion of dividends the common stock and adding
the corporation.
There was even more outspokenly adverse COM
ment yesterday when it became known that s25,oto-
600 of the obligations to be discharged by the
S50o00000 bond issue represented engagements made
Immediately after the time of the formation
OF the corporation and before the declaration OF
dividends had been begun. Anticipating and reply
ing these criticisms. the circular says. In setting
forth the objects for which the proceeds OF the
100000 bonds to be used:
Economies in manufacture still greater than those
which already have been accomplished may be
carried out It is estimated by the executive COM
mitee that the expendjture Of about $500 600 for
facture Of say, 100000 annually, and also under
output, thus adding from 100000 to 100000 to
the yearly profits. That these expenditures could
asemen does noE DOUBT but this would
respondngly would postpone the realization OF the
profits which. by the immediate of the money
'0na IN Febfaay & naPcus subsidiary companies
ly had begun the construction of additions to their
pants whlch IN some instances would nave dupl-
was something like ssooeSoSo As stated in the
at the time Of organization It was hoped might be
penditures for unnecessary enlargement of plants
has been by among the
ties of the other. However, owing largely to ad-
eonstrgctIon at the time Your corporation was or
ga1zed and IN order to finish work then already
the 10 the amount Of SIS 900 ooo ''s
gre ash1 about or o Pas
purchased [n almost Immediately after your CORPORA
sfGEKhodeTs these payments were described as
- The he finance committee is unanimous in its support
or the executive committee's recommendations and
tee. ;25 900 600 should be made available for i'm
mends capitalizng both the SIS 600 900 expended dur
ing the year for commitments made prior to your
be paid for properties above stated These three
purposes TIs sR, in the asgresate call for s5oooOoo
been povison for e this i:y t'@tS Wt
sold at less than par and which If sold Of at par
aD e W6s to nd g the @ rate S Of per
annual dividend requirements of the corporation.
The question whether not the management
would be justified in recommending an increase in
the bonded debt. the circular says. has been ex-
haustfvely considered; and the affirmative Is
presented in this language:
ecutive committees Is that considering the vast
aggregate value of the physical properties the pro-
to s5Ococo is wise and conservative the preferred
cent or 800 The eonssGuen 3" Per Per
m OF as GGmpared with the
annual saving OF 81 exceeding by $4,000 the
required by the proposed mortgage and which. in
to at pay Psr OFF m Gfn Of Se $50 be @ bae in
An increase OF bonded debt under such conditions
suits IS use TfS b OF the
pss 8ear Is St tho G oq"g b in rt1 the
interest charge of s275oO 600 when the bonded
which net earnings. by the contamination Of I'M
portant improvements, will be protected against the
per cent interest provision viii be put in the
bonds reserving to your corporation the right any
time after ten years to call them at no. which is
certain that your eorporao,n M by purchasing its
a per cent basis. During the first ten years that
the bonds are running your corporation to the ex
the bonds in the open market. provided. of course,
that they can be purchased on basis that will
To onset the exhaustion of ore beds. coal lands
and deterioration of plants. various sinking funds
being maintained. The further provision
of this additional sinking fund TO retire the pro-
posed new bonds is in effect equivalent retiring
40 per cent of the preferred stock in sixty years.
interest and dividend chareesHin fact decreasing
them by saving of about $500 900 a year To do
this and also obtain the substantial benefit OF
$4,000 600 s15000000 annually from economies in
and additional output by of
improvements. is the aim Of the present plan.
Accompanying the circular. which is signed by
dent Chairman is
of finance committee to the board of directors.
This report notes the enactment at Trenton of the
Reed bill amending the New-Jersey Corporation
act under which authority is given to retire pre-
ferred issuing bonds against IT. and recites
in full the resolutions adopted recently by the
board and published at the time declaring It be
advisable that 800 OO0 900 preferred shall be
retired and issue of $3.50. 900 900 bonds be made
and calling a special meeting of stockholders
May 10 to act upon the recommendations of the
board