Evening star., 1911-08-08

having said to the executive committee.
after they were brought together. and we
have given the matter a good deal of
thought as 10 how and what TO do with
II and not hurt the securities. And II
brought about this idea OF an attempt 10
retire part OF the preferred stock of the
company for second mortgage bonds and
have enough, in doing SO, SO We could get
out an extra amount of bonds to cover
these items
We think we can take up about ~ per
cen; of the preferred stock. or Saoo,ohh-
coo, which now costs $l4.O00.oC0 year
in dividends at per cent on Ss0.ta1Ua,
and in place of that issue S25o'ON,ooo of
second mortgage > per cent bonds That
would call for Slo, ,5Oo.ooo. and then have
$.o.Co0GS1 of new money in addition 10
saving a million and a half year. $l2.-
b1oo as against S14.HnH0. So we
coulc get S50.nn.O0o without costing US
anything and save a million and half
year besides. There is no question that
il would be very desirable from the
standpoint of the company II we can re-
tire the preferred stock. When we came
TO look into that We concluded the only
time to do 1t was when the preferred
stock was below par. s IL would then
be some inducement with people to take
the bonds. If they had stock At a. say,
and could turn ii into bonds at par they
Arranged for Syndicate.
Ard further, we can only do ii when
the preferred stock is held in large
blocks. so We could get syndicate of it
We began to look about for the large pre-
ferred stockholders. and have been sue
cessful, after two or three months work
in getting up a good-sized syndicate OF
large stockholders who would put up
their preferred stock and under Srite for
the success of the thing, provided the
stockholders generally did not take il.
The idea of the finance committee was
preferred stockholders and say: Will you
exchange 40 per cent of the preferred
stock for these second mortgage Donds?'
and If they did not do 1t, then the syndi-
cate would stand ready to do so to a
reasonable extent: and If we did not get
we only got 10 per cent-we would issue
% per cent of additional bonds for what
ever stock we took up. That is, If we
took up 20 per cent OF the preferred stock.
or 500, O,OOn.G00. we would issue S25 o1o "00
of bonds in place of s5o.00oVo0.
We thought it would be a desirable
plan in good many ways. il would give
us $af.om.000 of cash without cost. 1t
would wipe out these inherited improve
ments and pay the Rockefeller notes.
We have made an arrangement with them
to take these bonds in settlement of their
obligations. which is good thing, Of
course. and leaves us an additional sum OF
money that might BE used in reorganizing g
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 product
between the mills, saving in management
in handling the bus ness and increasin 9
the efficiency OF the mills so as to give
larger output and make more money
in that way.
Doubt as to Stockholders.
"As to how the stockholders will taae
It. 1t seems to US, il the preferred stock
was reduced about ~ per cent. the re-
naming ca per cent would be mere IA
vorable. and the preferred stockholders
might look at 1t in that way. We have
thought the bonds might be thirty-year
bond and convertible into preferred stock
within ten years and redeemable at the
convenience OF the company after ten
years at 10. Another thing We would
accomplish: If we got 20 per cent of the
preferred stock in obligations maturing in
fifty years we would be creating a sink
ing fund for retiring what is considered
some of the water in the concern. So
far Is the common stock is concerned,
this Is going to help IT. because the earn
ing capacity of the $50,cp.OOD would go
toward the common stock We have
worked out a form of bond and are 60
ins to submit it to the board l report
this matter now SO we may talk over the
plan if 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. so you can, If necessary,
issue bonds in place of preferred stock. "
The remainder of the record was as fol-
lows:
Mr. Perkns-No. we think that would
be dangerous We figured 10 per cent
because we believe that s5O,O00.OG0 of Sec
ond- mortgage bonds would be considered
very gCod: whereas, if We called 500 Hsi,
ND of preferred stock the universal criti-
cism would be that the bonds are not
bette- security than the stock. and If you
passed the dividends on the preferred
stock YOU would not be in the hands of
a receiver. and if you passed the interest
on the bonds you would be.
Common Stock Barred.
Mr. Roberts-Will the common stock
holders be invited TO subscribe to these
tondso
Mr.. Perkins-No. we thought that We
ought not TO be allowed to do that be-
cause We have tried to see where the
JuSlite WdS. iHc pieieIleu stothHolu-
ers are entitled to fair treatment as
can be given them for giving up their
40 per cent of the stock. and the com
mon ought not to be allowed to take
these bonds Moreover the common
stockholders have benefited by the earn
ing capacity of the s50.0an.0 GOO put into
the improvements.
Mr. Gary-I think. offhand. it is a
pretty good plan.
Mr.. PerkinS-It puts us in a strong
financial
charges.
Mr.. Gary-In some way must
raise some extra money We must
finance improvements that have been
made. and must be made in order To
make our different plants symmetrical
We must have more money, and this
seems to be a way TO get it without
increasing our fixed charges
slelaF AFPlaF MN MIN