The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1907-08-23
ATTACK BONDS.
New Turn in the Uncle Sam
Receivership.
Validity of Two Hundred Thou.
sand Securities Questioned.
UP TO JUDGE HAZEN.
AS Special Referee He Must
Act on the Issue.
Meeting of Creditors in Kansas
City Monday.

creators or the uncle Sam OH COM
pany are going to test the validity of
the bond issue of $4,000. which was
disposed of among about IT'S different
bondholders. at the creditors meeting
to be held at Kansas City, Kan, Mon
day, August 26.
A large number of bondholders
through their attorneys fear that the
bond issue will not have a standing in
the court when they attempt to have
their claims protected before z. T.
Hazen, special referee in bankruptcy.
If the bonds are held to be invalid
the 775 creditors will lose all of their
investments entirely, for their only
claim of preference is based on the
ownership of the bonds. The attack
on the validity of the bonds is based
upon the fact that the bonds were
purchased by partial payment of
money and return of stock already
purchased. That is. a man owning
stock in the Uncle Sam Oil company
was allowed to pay down certain
proportion of the face value of the
bond in cash, ordinarily running from
20 per cent to SO per cent. and at the
same time pay the balance due with
stock owned by him. This stock in a
large number of instances was sold at
a price considerably less than the
valuation placed on it when it was
oHered as portion of the purchase
price of the bonds. Stock which sold
originally at 10 cents a share and
maybe less was given the equivalent
of a valuation of 37h cents when it
was traded in for the bonds.
The validity of the bonds is being
attacked upon this standpoint Real
izing that in case the bonds are held
to be invalid by the special referee in
bankruptcy and later in the court the
holders of the bonds will have no re-
course at law in which to protect their
nf of fnI
are advising them to waive their
rights as bondh olders and simply
come in and present their claims
against the Uncle Sam Oil company as
the other unsecured creditors. Circu-
lars are being sent by attorneys repre-
senting bOndholders stating the posi-
ton taken and advising other bond
holders to join them in waving their
rights as preferred creditors, being
bondholders..
In circular recently issued to
bondholders their position is given to
be as follows: "A1l bondholders will
have to elect whether to claim the face
value of their bonds or ask a return
of their money and stock. We think
the safer course is to ask only what is
fair to the stockholders. who are not
bondholders, and that your interests
will be best protected in this way. We
shall contest and oppose any allowance
on claims made for the face value of
the bonds, as attorneys for those we
Two Knotty Questions.
Another circular issued by attor-
neys for certain bondholders says in
part: Those who choose to rely on
their bonds and the mortgage which
purports to secure them cannot par
ticipate in the election of trustee or
vote at creditors meetings, and will |
have to meet the claim that their
bonds and the mortgage securing the
same are void, and this is the view
we take and expect the court to sus-
tain
1.-TWO questions will be presented
and will have to be decided" said
Judge u. T. Hazen, special referee |
"One is this question of the validity of
the bonds. which 1 understand will be
raised and the other is the claim of
of stockholders who claim
misrepresentation and that on this
account they should be allowed to
come in as creditors of the company.
In deciding these two questions it
journment from Monday to further
date but we certainly expect to trans
act a lot of business on the first day
and the rumor of an adjournment
without doing anything is false"
Tucker 1t is stated, holds $4,000
of the $267.000 bonds issued and the
payment rendered by him for the
bonds, stock in the Uncle Sam Oil
which he secured by making
a charge to himself on the books of
the company, is said to be one of the
other main reasons for an attack upon
the validity of the bond issue.
Ordinarily the bondholders would
be the first creditors to be protected,
the unsecured creditors coming next
and If there is anything left the stock
holders profiting.
That the creditors are in favor of
reorganization of the company, is the
opinion expressed by Judge Stephen
H. Allen. representing a number of
In his opinion the cred
itors realize that if they ever expect
to get their money out of the company
it must be kept going as long as pos
Sible.
cit would be hard to say what could
be got for the property if it had to be
of. AS long it is running
there is some hopes of making some
thing out of 1t for the stockholders,
said he.
1t is probable that Orie Morse, the
present receiver, will be elected as
trustee though a hard fight will be
made against him by H. H. Tucker,
Jr., who has other preferences al |
ready expressed.
Not Much Money Lost
Z