The Hawaiian star. [volume] (Honolulu [Oahu]) 1893-1912, 1911-08-26
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9-VO'VVV,VVVt Wnltn HOW COSJS 3l4,OUU,-
600 a year in dividends at z per cent.
on $2000O0,000, and in place of that
issue $25O,OOOOOO of second mortgage
per cent. bonds. That would call
for S12, 100000 and then have 5000
600 of new money in addition to saw
ing $1,50O,OO0 a year, $12,5O0,O0O as
against $14,OOO,OOO So we could get
S50,OOO,OOO without costing us any
thing and save $1,5OO,OOO a year be-
sides.
There is no question that it would
be very desirable from the standpoint
of the company if we can retire the
preferred stock. When we came to
look into that we concluded the only
time to do it was when the preferred
stock was below par, as it would then
be some inducement with people to
take the bonds. If they had stock at
ninety-fve, say, they might feel that
there was something in it. And, furth-
er, we can only do it when the pre-.
ferred stock is held in large blocks
so we could get a syndicate of it.
1--WE began to look about for the
large preferred stockholders, and have
been successful, after two or three
months, in getting up a good-sized
syndicate OF large stockholders, who
would put up their preferred stock
and underwrite for the success of the
thing, provided the stockholders gener-
ally did not take it. The idea of the
Finance Committee was that we would
make an offer to all of the preferred
stockholders and say:
"'Will you exchange 40 per cent. Of
the preferred stock for these second
mortgage bonds? and if they did not
do it, then the syndicate would stand
ready to do so to a reasonable ex-
tent; and if we did not get the entire
40 per cent, say, for instance, we
only got 20 per cent, we would issue
20 per cent. of additional bonds for
whatever stock we took up. That is,
il We took up 20 per cent. of the pre-
ferred stock or 500, 100000, we would
issue $25,OOO,OO0 of bonds in place of
I$5O,OOO,OOO.
1--WE thought it would be desirable
plan in a good many ways; it would
give us $5O,O00,00O of cash without
cost; it would wipe out these inherited
improvements, and pay the Rockefel-
/ Ter notes. We have made an arrange
ment with them to take these bonds in
settlement of their obligations, which
is a good thing, of course, and leave
us an additional sum of money that
might be used in recognizing some
of the plants and doing things that we
want to have done in Chicago and for
the Bridge Company at Pittsburg. In
this way the money really would earn
in two ways; First, in the handling of
the products between the mills, saw
ing in management in handling the
business and increasing the efficiency
of the mills, so as to give a larger
output and make some money in that
way.
The Stockholders Position.
CAS- to how the stockholders will
take it, it seems to us, if the preferred
stock was reduced about 40 per cent,
the remaining 60 per cent. would be
more favorable and the preferred
stockholders might look at it in that
way. We have thought the bonds
might be a 30-year bond, and converti-
.ble into preferred stock within ten
years and redeemable at the convent
ence of the company after ten years at
ITO.
another thing We would accom-:
plish. If we got 40 per cent. Of the
preferred stock in obligations, matur-
ing in so years, we would be creating
a sinking fund for retiring what is
considered some of the water in the
concern. So far as the common stock
is concerned this is going to help it,
because the earning capacity of the
sac, 100000 would go towards the cont
mon stock. We have worked out a
form of bond and are going to submit
it. to the board. report this matter
now so we may talk over the plan IL
you desire. We propose to offer the
whole thing to the preferred stock
holders and let them vote on it."
Continuing, the record quoted Judge
Gary as asking if the option would be
extended to all stockholders, and If
the Finance Committee proposed to
make an elastic bond 80 you can, if
necessary, issue bonds in place of pre-
ferred stock" The remainder of the
record was as follows:
Only Preferred Stockholders.