The Birmingham age-herald., 1909-05-30
From the New York Financ;er


 XCNF late years bankers have is- kSJ sued statements concerning in- vestment securities which have been very perplexing to the person who for the first time desires to place money on some sort of dividend earning paper. i There has always been fear in the mind of the public at large Chose not &C., quainted with matter pertaining to securi- 1 ties), and it was through these fears that the prospective customer kept away from the offices of that seemingly terrible per son-the banker, or better still, the in- vestment doctor. Bankers should be moro explicit in their statements, defining cer- tain terms and phrases. when offering an issue of bonds.
 As guide for the investor the Financier has prepared brief synopsis of what the various bond terms refer to, and how an investment security may be valued | 1. The value of bond depends upon the security covered by the paper in question.
 ?. The price of a bond depends on the se- curity and rate of interest. 8. "A listed bond Is not always the most salable; stock exchange bonds being sub ject to various fluctuations. | 4. A first mortgage bond is not always better than second mortgage security.
 5. A bond selling below par must not be considered cheap at all times. | G. Mortgage bonds are first lien against property and earnings.
 l '. Bondholders are entitled to a fixed rate of interest and in default of same | may fcreclose.
 8. Corporations cannot issue bonds with out due authority. The issues must be or dained by proper vote of the stockhold- CTS, ratified by the board of directors.
 g. Bonds must be secured by deed of trust, covering the property of the corpor- ation, such deed to be executed in favor of some reputable banking organization.
 10. First mortgage bond is secured by a first mortgage on the property and income of the company issuing it.
 Il. A second mortgage bond is paper is- sued having second right upon property and income. In the event of liquidation, i the principal and interest of the first mortgage must be satisfied before the second mortgage is attended to. 1 12. General mortgage bond is secured by | a general mortgage upon all the property of corporation, irrespective of other mort ga ges outstanding against any of the individual properties.
 | 13. First consolidated mortgage bond Is | issued to cover a consolidation of several | companies which have bonds outstanding, and to furnish additional funds for im- provement; part of these are reserved to pay outstanding debt as 1t becomes due. first consolidated mortgage bond be- comes a first mortgage only after the un- derlying liens are paid. l A. Prior lien bond is practically a first mortgage bond and is the underlying lien 1 on a first consolidated mortgage. 1 15. First and refunding bond is issued as a first mortgage on part of the prop | erty, and the remaining part held to re- fund bonds outstanding when they be- come due Eventually this becomes a first mortgage. 16 Extension bond is f1oated for the ex- tension of business such as in water works, street railways and sewers. As security tlAey have the new construction for which they are issued.
 IT. Divisional bond is foated for certain sections or divisions of railroads; Its se- curity being that particular section for which the bond Is authorized 1S Convertible bonds are those which may be converted into some other form of security usually stock, the terms of which are so made that it is advantage ous for the holder to convert his belong ings.
 19. Car trust or equipment bond con- cerns the purchase of rolling stock for railroads. The title of the equipment is held by a trustee. the road paying a rental sufficient to meet principal and interest until the entire debt is liquidated. after which time the equipment very