Omaha daily bee., 1902-05-11

1890 to be In serious straits and have to
supply the full amount subscribed. and then
be In doubt about q dividend. This does
not happen often. however. az the man
ayers Of syndicatss are usually houses Of
such standing that the success OF the
scheme is practically guaranteed before II
is ever launched.
Union Pacific Deal.
Outside Of the steel syndicate the most
profitable underwriting deal Of recent years
was that Of the reorganization Of the Union
Pacific Railroad company. Its profits were
never publicly stated. but the circular con-
! tanning the reorganization plan stated that
the syndicate had pledged itself to supply
$1,000 600, IL needed. II was TO receive
s6,000,000 in preferred shares. OF which
Kuhn, Loeb 4 Co, as bankers, were to re-
ceive $1,000. 600. The syndicate was never
called upon to pay much cash and Union
Pacific shares are now selling at around
1O2 and 1903.
The syndicate which underwrote the re-
organization Of the Erie railroad received
81. 900, 600 in new prior lien 1 per cent
bonds, and contracted TO furnish up to s14.-
900, 600 in cash to the new company. In adj
dition, the firm Of J. P. Morgan & Co., az
depositaries Of the old securities which
were to be exchanged for the new, were
to receive $500, 900 in cash as compensation.
Last October the Mexican National rail-
roads affairs we're readjusted. The syndi-
cate which carried the scheme through
bought for 81, 967 600 cash the following
securities. 70 which are added their present
market quotations: Prior lien AZ per cent
bonds, 50. Pol 600 Cpar v%alue), present quo
tation 1929 first consolidated As, So, 595. 312
par value, quotation Sly, and preferred
stock. 81, 400, 900 par value. present quota
ton Al.
In reorganizations the underwriting syn
dicates always assume responsibility for
assessments not met by shareholders. This
was q prominent feature Of the Atchison re-
organization plan which was made public
on June p, 1894. The reorganization COM
mittee, in a circular to the stockholders
outlining the plan Of rehabilitation, said:
"Syndicates may be formed on reason
able and usual terms to furnish the money
needed in case OF foreclosure TO pay the
non-Rssessments, pay bondholders their
shares OF the proceeds Of the sale, and
such syndicates by such payments and to
the extent thereof shall be entitled 20 and
shall represent and succeed to all the rights
that the bondholders receiving such pay
ments would have been entitled to IL they
had assented to this plan and deposited
their bonds"
The assessments on The common stock OF
Atchison amounted TO $40, 0O0, 900 when the
company was reorganized, and a syndicate
was organized in London and this country
to supply the cash. This syndicate was to
guarantee the exchange and f~otation OF
the following securities: 1929, 900. 900 gen.
eral mortgage bonds. SS7, 600, 900 second
mortgage bonds, S12. 900, BOO prior lien bonds
and 1902. 600, 900 Of common stock. Just wha:
sum was cleared by the syndicate in this
reorganization was never announced, but
the immense responsibility assumed justi-
fes the statement that the profit was very
large, SO, 900, 900 or $12, 600, 900 being re-
garded as q conservative estimate.
This matter OF guaranteeing assessments
was a very important one also in the re-
organization Of the Richmond & West Point
Terminal company-one Of J. P. Morgan's
great accomplishments. In the Richmond
Terminal company-whicb was a holding
company, interested IN the Richmond &
Danville, East Tennessee. Virginia & Geor-
gia, and other railroad properties In the
south-were such interests as General Sam
uel Thomas, Calvin S. Brice, Patrick Cal
houn, John H. Inman and Alfred sully.
In the general crash OF The 1893 panic
period this company went To pieces, and J.
P. Morgan & Co. reorganized the properties
into the present prosperous southern Rail-
road company. The commission OF the
syndicate which foated the securities OF
this new company was in stock at that
time valued at 81 a share, but is now sell
ing at S3s. 1t is supposed that the syndi-
cate sold its holdings at about 25-thus
bringing into its Golfers q very comfort
able number OF millions Of dollars upon its
guarantee Of some $40, 900, 900 or SIS, 900, 900
Of cash.
MIR. MOrgRn's First Triumph.
The first great achievement Of J. P. Nor
gan was his first reorganization Of the
Reading railroad. II had been controlled
for years by Franklin Gowen. who had
done many spectacular things, such as
floating the very elusive deferred income
bond" There was q contest between the
! Gowen interests and Drexel, Morgan e.
Co., which resulted In q readjustment OF
the company's affairs. MIR. Morgan is con-
ceded in Wall street to have made very
large commissions by this deal.
The road was turned over TO Austin Cor
bin, and very large net earnings were re-
ported. A. A. Mcleod attempted to com
bine the coal and carrying industries on the
Reading lines, and the property went to
smash. Following the panic OF 1898, Mr..
Morgan again reorganized the road, reaping
large commissions once again.
The first OF the large industrial COM
panies to be reorganized was the Sugar
trust. Its reorganization was forced by
the fact that its charter under the laws
Of the state OF New York had not been
legally drawn, and It was forced 10 take
refuge in New Jersey. The Cordage trust
was the first Of the big industries TO be
really recognized after the modern fash
ion. Its troubles furnished one Of the most
picturesque incidents of the panic OF 1893.
Mr.. Morgan vas called into consultation
IN this REIMBURSEMENT, but the company has
had two reorganization since its first dis
indignation.
In the formation Of many large combinR-
lions the underwriting agreement is pri-
vate and only the managers appear as
financing the deal. In the Northern Securi-
ties combination, for example. no syn
dictate managers appeared at all. Control
Of the stocks TO be consolidated was al
ready secured and that any consolidation
was to be effected was Ostensibly not one
Of the purposes OF the company's forma-
tion. Shares OF the Northern Pacific and
Great Northern railroads were deposited
| directly with the Northern Securities com