New-York tribune., 1907-03-15
ALTON FINANCING.
ROAD MAKES STATEMENT.
r RecapitaIizatiOn Done Publicly =
Bond Issues Legal.


understanding Of the facts respecting the recap-
talzatIon Of the Chicago & Alton Railroad Com
pany. resulting from the recent inquiry by the In
teTstats Commerce Commission. a statement which
has been prepared primarily for ths information
OF the holders OF Chicago s. Alton securities has
been issued the official presentation OF the facts.
In part. it is as follows:
tai stock of the Chicago & Alton Railroad Com
pahy Was acquired by the purchasing syndicate az
an aggregate cost OF over $2S0gVV. at the rate Of
$lio a share Tor tins common and &AyJ share for
SIockholders contained IN widely Pu6iished cir
Sular That the Stockholders at that time were
fully apprsed OF the future course of the company
with respect to the capitalization OF previous ex-
pendltuTes OF income for permanent improvements
from Is shown by tie following public circular
stockholders by + B. Blackstone. who for upward
OF twenty years had bsen the president and NOV
Ing spirit Of the Chicago & Alton Company.
go. February. 1888.
In my communication addressed TO you under
dStes OF S1st OF January 1881 l made certain
Mir. J. J. Mitclen TO purchase your shares. 1 now
wish 10 supplement- that statement by advising you
pany and the Issue OF stock dividend 10 represent
refundnS OF the outstanding bonds OF the COM
pany and the issue of Stock dividend to present
esinnss heretofore invested In perHanenJ I'd
The syndicate comprised upward OF one hundred
individuals, firms and corporations, and for over
certificates representing partcipation5 IN this
plan OF recapitaIzation was intended to create low
interest bearing preferred securities (bonds and pre-
property which preferred securities were 20 repre-
sent the greater part OF the syndicate's invest
ment: and also common stock which would repre-
sent the future OF the property and the addl-
tional earning capacity which was expected TO re-
salt from the application OF progressive methods
cap,taI f0r the improvements Of the property ana
the expansion Of trailc and OF the service to the
MPTOclS M tsS bI Ti U ~ an 1 foCtS 5rot %
o. iD tie Tec.nf investieaifon have been 6ubGisiv
stated in Applications for listing the securities upon
the New York Stock Exchange. in annual reports
OF the company and in otLer public documents
which have been accessible to rybody
The complicated legal and hookkseplns t'canl-
calides incident 10 the scheme OF re3d1ustment
nresss seen In eaptSItsGo and the prots os the
syndicate have been absurdly overesimated-
The statement here carries tabulation showing
the market value OF the securities representing the
capitalization of the Chicago & Axiom Railroad
Company, and another shows the amount Of
curties outstanding on June So 1905. the result
OF the recapitalization and capital expenditures.
and continues:
cenber 81. Isas Of about SIS O00OC0 taxing the new
common and preferred stock at par; AS a matter
below par AT It's issue the common stock sold at
about % ana fle pIe'eFeI s'o9 a, dTG securities
under the recapitaliZatOn. including full dividends
gate amount which. under the former management
the company had been paying OUT annually by way
0e 0ew capital expended for Improvements and ad
sent tho future OF the property anu Ihe S,It
earning capacity which was expected 70 ISsS.I'
crease in the companys facilities This was pre-
cisely the 6aSls Of Gapitaliz9ton %Tsn i,1t and
Reorganization Of many railroad enterprises @ m 'I9 H
need of readjustfnent IS apparent from the IaSt
that for years it had been steadily deteroIaIns ~ ~
physical condition. In the qu&hty OF us ,-S ~
The communities along its lines ana IN eaFniHs
ba fact that the property has not made as laTge
earnings upon the new common STOCK as srdi vas al
lures required TO modernize the property pToTso 70 20
he much greater than was anticipated ana s4so 70
decline In fTeignt rates IN the COM
panv's territory which has taken place IN the last
few years The oficial statements show an aggre
gate decline the freight rates OF the Chieago q
Alton since 1888 OF approximately - per b Js,lt1s
II is estimated that IA the current nSfai yr5ns Us
with respect to the sale Of per cent bonds IN i9
& Io 10 favored individuals. but without dscrimna-
ton 70 all of sxnGests PaTpaons and that the
sale of both bonds and stock to stockhol6eFs az az
HeneraIIv approved expedient. While the low IN
tSreSt lbe T bonds became savings bank investments
made possible to market them & az sEDSlanl t - t
them upon an interest basis Of about 4-s per cent
tralnsacfion so far as the company was concerned;
been sold to the stockholders at price slightly
since IsO d alton has more than doubled while the
on5t Of freight carried for every dollar paid out
IN IN cent The capacity OF the freight equipment
has been 1GT1msn nearly loo per cent and the
traction capacity Of locomotives over 10 per cent
Ia caDitali7ing part OF the company's eXpendi-
,,Ires for improvements and distributing S16oSls9 OK
tStS addition 70 surplus by way or an extra divi-
Send Of so per the old stock the directors
Were simply carrying out the purpose @I the former
r,eDsgement OF the company. as contemplated IN
the public circular OF Mr Blackstone quoted above
'lS anDarent nnisappreheuson has resulted nom
The testimony OF witness that the mortgage Sc
gCS. the SL per cent bonds covered as uninl-
ortaS+ oart Of the security, short piece OF road
Witch the company was authorized TO bnId out
Mt'.b bod not been actually constructed. This pro-
,eion is in accord with the common practice with
sract ~ general mortgages or railroad companies.
and n conferred pecuniary advantage Whatso-
eyer any one. I. 4. .....5
trt eminent counsel have advised that there Is not
the slightest doubt as 70 the validity OF both issues
OF bonds.
unaE NEW YoRK PosToFFIcE CLERKS.