New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1910-08-03
THIRD AVENUE PLAN
MUST Be MODIFIED
Reorganization, Projected by
BondhoIderS. Held Up by Pub
lie Service Commission.
TOO MUCH CAPITAL FEARED
Smaller Issue, Based on Valua-
tion, Will Be Authorized, with
Chance for Increase
IF Needed.

The proposal Of the Third Avenue
Railroad Company bondholders for the
reorganization of the company and its
subsidiaries was turned down yesterday
by the Public Service Commission. The
opinion. written by Commissioner Malt
bic who. with William r. Wilcox, the
chairman Of the commission. was as
signed TO conduct the hearings, sets
forth that the granting OF the applica-
ton would mean authorizing an over
capitalization.
The decision however is not final. as
il leaves il open to the bondholders to
accept the authorization Of a smaller
issue. Commissioner Maltbie's opinion
gees further. and intimates that if the
issue of securities first authorized should
not be found sufficient for the restora-
ton OF the property, the commission
would be disposed to authorize such
furthed issue a. might then be found
necessary
The total Of the securities which the
bondholders' reorganization committee
sought to issue was Sa4.0o0,ee0, which,
With q mortgage of 100000 which it
was proposed 10 retain, would have
meant total capitalization Of $4,000
600, whereas the commission puts forth
the view that the physical valuation Of
the property is not more than $4,000,
coo. while the current assets are S1.146.-
667 - and the current liabilities SIS
110E44 "a, so that the intrinsic value of
the property represented by the stocks
and bonds Of the old company is placed
at s1s.135. S93 IS. while the face value OF
these securities was SD. 10000.
Obligations Also Considered.
In addition to the sum fixed as the in
trinsic value of the property as it stands
to-day, the commission takes into con-
sideraticn the obligations TO be re-
funded. which amount to practically Sc
100000; the expenses OF organization of
new company. estimated at 100000,
and the amounts needed TO place the
tracks Of the Third Avenue Railroad and
subsidiary companies in first class con-
dition. said TO be 100000. This would
bring the total required TO practically
sd 100000 To this. it is held must be
added an allowance for discount on the
securities offered. which are not likely
10 be sold at par.
The commission believes that the
amount Of capital represented by bonds
should not be in excess of the amount
upon which there is q definite certainty
that interest may be earned continues
the opinion. 1t would obviously be I'M
wise and useless TO approve plan which
might easily mean another foreclosure
and reorganization in a few years. This
Is the second time within ten years that
the Third Avenue Company has been in
the hands Of a receiver. 1t is time that
Q conservative plan were adopted. and
upon such sound principles that another
tataclysm viii not be necessa ry.'
The opinion goes on to quote William
4 Guthrie, chief consul for the new COM
pany and the bondholders. as well as
Frederick " Whitridge and M Bron-
ner. one Of the witnesses. to show that
the net earnings Of the road az the pres
ent time are probably less than 81 500
oea. whereas under the plan proposed
in the application net earnings of fully
s. 100000 would be necessary.
Question as to figures.
The latter amount was estimated by
Mr.. Bronner and Mr., Whitridge as the
amount Of net earnings at the end of |
three years. and it was provided that d /
1-ortion Of the securities should pay no !
interest during that period. The COM /
mission considers, however, that several 1
Of the items brought into the computa-
ton by these two witnesses We're uncer- /
tain quantities. and adds. moreover. that /
several important items Of expense We're /
omitted
The item of depreciation is one that /
caused considerable difference in the /
testimony adduced. Mr.. Bronner consid- /
cred 100000 d year sufficient. Mr..
Whitridee said $4,000 was enough. /
While the commission. taking into con
si'lRration the evidence of Henry Floy.
The expert engineer called by the com
lsny, and that given by Z. e. Connette.
the commissions transportation engi-
reer estimates the depreciation at 500
COG but adds that by allowing compound
interest this might Ice reduced to $40
coo.
II is pointed out. however. that com
pound interest cannot run all through
the term. as requirements must be made
~ varying periods, and the commission
therefore fixes $J00.eto as a reasonable
sum for annual depreciation. Taking
1he various elements into consideration
she commission estimates that the net
earnings for 1909-'11. under the best con-
ditions. viii be $12Gooo0, while those
for 1901, after paying interest on
underlying securities, mortgages and /
notes OF subsidiary companies, may vary
from $4,000 TO 81 100000, applicable
10 dividends and interest on the securi-
Ties. Even this estimate. however. il is
POINTED out, does not take into consid-
Grafton the amortization Of discounts.
commissions and expenses
Securities To Be Issued
On the other hand, the proposed plan
called for the issue Of the following Sc
,uTitios:
First refunding J9-year. 1 per cent
gold bonds, redeemable lG5 and
accrued interest on or after Jan
uary !, So -. 9oD
Adjustment mortgage. Je-year > per