The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1907-07-14

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fcnsible financing. First came the
profit to the stockholders arising out OF
the sale to themselves of $3c,o00,000 OF
bonds at 65, which sold for several sue
cceding years for s2is to a. Second
came the 80 per cent. dividend, based
on amounts expended from income for
improvements, much of It nearly thirty
Years before. and recently capitalized
Third came the psuedo transfer to Stan
ton, and his contract. under which the
new company paid S10,0oo000 In cash
for preferred stock which had cost less
than s7,o0o,000. Fourth came the con-
version of 1924 shares of common
stock In the railroad company into
la5,42S shares of common stock, plus
194,S9O shares of the preferred stock
in the railway company, part OF which
was sold to the Union Pacific at S6ls
share. Fifth came the sale of the St
Louis, Peoria and Northern for $1,000
600 cash, Sixth came whatever interest
the syndicate may have had in the sale
to Kuhn, Loeb e. Co. OF s22,oo0,00O OF
DOnQS at bU cents OH tHe QOlldT. SeN-
enth came the fee of 100000 to Mr..
Hartman for financing the enterprise.
This analysis is no doubt incomplete
but 1t is suggestive.
BY way of justification or excuse
we are told that the methods OF the
financing of railroads which prevailed
IN the year 1900 are now obsolete. ow-
ing to a higher degree of conscientious
ness among tinanciers: and, moreover
that the Chicago & Alton should not
be regarded as an isolated instance. in
asnluch as it was dealt with much as
other roads were al that period.
The first of these statements Is, we
trust. true: the latter statement is not
calculated to uphold the value of Amer
lean railroad securities. t
1t is true, however, as contended,
that close examination of the meth
Cd of capitalization adopted in the
case of the Chicago and Alton shows
/ that while the total Of bonds and stocks
\ was doubled, there was no such pro-
4 portionate increase In the fixed charges
of the railroad. Under the Blackstone
MANAGEMENT. when per cent. was
| paid on the stock and but small bond.
ed debt rested on the property the
yearly charges for dividends and in.
terest amounted to s2,792,sS6, whereas
/ with the greatly Increased present
| capitalization the yearly fixed charges
4 amount to but s3,471.590. This. Of
4 course, takes no account of the pres
4 ent common stock, upon which no
alVidends are paid The plan adopt
4 ed was to substitute long term bonds
lana guaranteed stock bearing an ex-
4 ceptionally low rate of !rterest for
! common stock which paid a large di,j.
I dend and for bonds about is ms.
/ lure bearing a high rate of interest
lnus the property was not burdened
/ win an interest payment proportion.
/ ate to the increase in capitalizatior
4 no matter how great the profits made
from the reorganization However,
.hese ponds must some time be maid
Ivy I'VE FOR fifty years as a debt
:. ,he taliroad, and the stock will con.
a ~ q p'opertS which it did little, IL
Il anything, to create. =
1 Conclusions.
7. ne effect OF the control OF tho
\ Southerh Pacific by the Union pacjac
i,as neef 10 unity and amalgamate the
n,"'ia selheht or these two railway com.
pahles and their steamship lines ana
20 eliminate competition between then
IN trahscontinental business and in
business to and from Oriental ports.
Inc Union Pacific, as has beer
SHOWN controls The San Pedro, Los
angeles and Salt Lake Railroad. the
= stock OF which is deposited IN Tie
hands Of trustee This limo was
originally Intended as an Independent,
road, extending from Salt Lake, where
; u connects With the Union Pacific anf
Win the Denver and Rio Grande tr
, Los Angeles and San Pedro, Cal
, There is therefore no competition be
(. tween this line and the Union Pacih,
and Southern Pacific
1t appears that the Union Pacih,
also owns $lo,ooo,ooo, par value, OF tn.
3 stock of the Atchison. Topeka anr
Santa Fe Railway Company, and abou
$ S6o,ooO,oOo more is owned by indIvid
: uals connected with the Union Pacific
e making S4o,oo0.00o, or substantially 1
: Per cent. Of the entire capital stool
, OF the santa Fe COMPANY. Who own
d this stock outside of the 10000 D0C
c Mr. Hartman declined to state. Tw
= directors Of the Union Pacific are ais
9 directors Of the Y Santa Fe company
and there is now a division ,of III
Oriental traffic by the Pacific Mai
c Steamship Company between the Unto
= Pacific and the Santa Fe systems.
1t appears that there has also bee
:. division OF the fruit traffic betwee
= certain California territory and tn
Il East. each taking a certain percentage
n ana that north of San Francisco tn
y 1lh'on Pacific and tiie Santa Fee nav
!, Joined and amalgamated their interes;
= in The Northwestern, Pacific Railroa,
and that a Joint control has been ir
ausurated similar 10 that OF the Altol
E Prior % the acquisition OF the Sou,f
rs ern Pacific by the Union Pacific, II
VI Denver and iEio Grande 4ystem extenc
= lhS from Denver where 1t conneC