New-York tribune., 1902-08-24
STEEL PLAN EXPLAINED.
G. w. PERKINss AFFIDAVIT IN THE
HODGE SUIT.
REASONS FOR THE CONvERSION-CON
FESSION OF ]. III. LANCASTER

Supplemental affidavits in behaf OF the
United States Steel Cooperation were filed yes
terday in the New-Jersey Court of Chancery at
Trenton in the suit brought by J. Aspinwall
Hodge to restrain the steel corporation from
converting S2Ooooo.GOO per cent preferred
stock into S2O00O0000 > per cent mortgage
bonds and issuing $JO,oO0,GO0 additional bonds
for improvements. Chief among the aff1davits
is one by George ". Perkins. director OF the
steel corporation and chairman of it's hnance
committee. who is member of the bankins urn
of ]. P Morgan & Co. outlining the policy of he
steel corporation and explaining In fuH the rea-
sons for the conversion plan
Mr. Perkins says in his affidavit that soon
after the organization Of the steel corporation
the executive and finance committees oesan an
investigation as 10 the extent, condition, capae-
itv and needs Of its several properties IneH
he says:
years close application 1G thsse sd p5o1 been
r~alized the executive committee brought to the
attTnti2aa r6ya0r of abe abont Of cash to be used
improving extending the various plants o. TIE
sSsidbaTy b,xsS sSm9an5ss 5 end an Sooo Whch had
nse szpenGGed pinGs uhderskn by the subsidiary COM
ps Ti0r % eet to tn %a eonsered for
weaks The members OF both committees became
! woula not only tend TO strengthen permanently the
existing earning 1 @ pSsn s S was
the lowest estimate Of the probable iii incTsased rsri
Of the corporation advised that in their opinion.
such Increase would equal s2o,oHeo year
PRESENTED SERIOUS DIFFICULTIES
The problem Of raising the funds. Mr. Per
kins saws presented serious difficulties. The
/ finance COMMITTEES decided that the corporation
could not risk taking the sum required from the
$50 ON COO surplus and that the funds would
have TO ba raised provided either ny the
issue and sale of preferred stock or by bor-
that the issue Of S5o.O0o,ooO in : per cent pre-
ferred stock the market price of the sock being
90 would be too expensive. and like decision
was reached as to the suggestion that Sootn.-
900 in > per cent second mortgage bonds be Is
sued because it felt that such bonds
could not have been sold at price higher than
95. and because the bonds would have made an
increased charge ahead of the stocks MI Per
kns's affidavit then goes on:
1t was finally determined that the most economi-
cal and advantageous plan was 70 create an ana t lSSts
If face & IsGg % siS gr GpocaeS s in pros
curing the necessary cash requirements; ana sec
ond in purchasing and retiring 500 0oooo par value
of the outstanding per cent cumulative preferred
stock. The retirement of this stock would save
charge. and this sum would not only provide the
leave surplus of s5O0,es per annunl: which
would be sufficient to proVIne If b n bonds
and leave besides Si5O0m per annum net appIca9Ie
I the plan ena ble6 the corporation procure the
new i eap.4 d rimuIative preferred dividends and
in addition provided for the redqS@n m & 9t M bn of
the remaining preferred and all the common stock
! on account of the difficulty in securing pre-
ferred stock to be converted into bonds. Mr.
Perkins says. the best that could he done was to
organize a syndicate that would agree to the
following:
First-Purchase and lodge with J. r Morgan <
Co $50 600 600 of preferred stock.
sceond~Agree to exchange all of this or only 20
lion. for second mortgage bonds ,,. e-o., -,
steel corporation at par in exchange for S20"'eo
For this the steel corporation was to allow the
SYNDICATE per cent commission on all the the bonds
mission on all bonds it took at par for cash,
that the @ 81 stood Sdr5s n tRe end IN 'faT far
stock and s200OoO0o of bonds issued for cash.
sRndcae sRf sfs PeG ce3t ON sO ps' Sr o
and Morgan E Go oS WSSd @ m hSye s0r reGeyed for for
syndicate and the securities ana for inding a
- d6 6o OF or saa The contract moreover was
made subject to the approval OF the stockholders
THE RIGHT RESERVED
The steel corporation reserved the right to
offer to every preferred stakeholder in the
| pora ton the option to subscribe for these
bonds to the of 40 cent of his preferred
| stock and said that If every preferred stock
| holder exercised his right and took 40 per cent
of bonds in exchange for his stock the syndicate
would be placed in the position where it would
! only get So OOo.000 Of its SSo.ooO.Wo of pre-
| ferred stock converted into bonds. and would be
! left with S4S 100000 of preferred stock ON its
/ hands although il pledged itself to tie up
! $50 0OO Ooo of stock for eighteen months and
! could not sell it in any way dispose of 1T. no
| matter what the price changes IN the stock
| might he or what the business conditions in
| the country or how much any syndicate sub
scriber might need the funds. In consideration
| of ali this risk said Mr. Perkins the syndi-
| cate was empowered TO receive commission of
| 4 per cent ON such bonds as were issued 10 pre-
| ferred stockholders not members OF the syndi-
! cate The S1O00o.0oo maximum to the syndi-