New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1913-01-28
MORGAN FIRM EXPLAINS p.
SUBWAY FINANCE PLAN
Declare Profit for Floating
S170,o0O,00O Bond Issue Will
Be Only 21I Per Cent

piioNinS conference which start
ed IN the Metropolitan Club last night.
ana which was attended by Henry i.
Dawson, Thomas W. Lamont and J. L.
Morgan, jr., all OF the firm of i. p.
Morgan & Co, and which was later
continued at the nome of Mr. Dawson.
IN No. Il West Fifty first street. when
Charles w. I'aTnham. secretary to
Public Service Commissioner William
Il. Wilcox, was called in, a letter was
made public by Mr.. Farnham shortly
after o'clock this morning. which
had been sent to the Public Service
Commission. The letter is as follows;
Hon. W. Il. Wilcox. Chairman Public
Service Commission.
Dear sir: Referring TO matters discussed
ia our conferences, We are very Slau TO
make a statement concerning our under
takinGs with tn, lntcrborCush Rapid
Transit Company.
over two years ago. at the request of
the lntcrborOugh Company, with which
we had 10 official connection. we under
took To assist in plans by which the In
terboroUch Company could secure funds
To be used in the construction. equipment
and operation of new SubWaNs. Ind'r
the general terms finally .lrangeG o--
tween the city ana the lnterhorOuSh
COMPANY. we We're Informed that the
company would require ;nc SUM of ap
proViinately N50.010c01. Of which about
%j0.CO1.cGo were TO be used for rciunding
purposes.
Tnis meant that new bonds would have
To b. ISSUED 10 an approximate amount
OF Sl0.W9ouU. IndSmJch GS these oouiS
Were 10 oc secured 10y mOrtcaSc-not
uUOu the subway itself. which was to Dc
the property of the cty-but upon an
operating lease. equipment and other
property of the company. il was ntceS-
sarN. as is the practice with bonds OF
similar character to provide q sinking
fund 10 retire the bonds al or before the
expiration OF the lease. To proVidc Tor
sinking iurd requirement the bonds Wrrc
10 be Callable at 10. provided the com
pany should not be- able 90 purchase them
vision would in no way force the com,
pany TO pay the price OF 30. but wo'Id
prevent holders Of bonds nom eNactlhS Il
higher phemium from the company
Preferential Claim Reliance.
TO determine the question Of price 20
this sinking funu. the lnterOOrough Com
pany relied upon preferential claim L.
earnings from the operation of the cN-
isting subway and elevated systems. ana
of the new subwaNs. this claim being
simply sufficient, in our judgment. iof
these precedcntS. although the city IN no
way guaranteed this result, nor NOulI Il
constitUticnaliy do 50.
"To determine the question of price 10
be paid t. the lnterbOlou"h Company .o'
its bonds. il was obviously necessary 10
nave regard To theNrUling prices 81 othcl
bonds of like grdde. and TO the idct tldt
the money for this issue OF Fl'pV"'V"
I the largest single corporate Tansdc-
tiOr that We can rccalD must Dc ldf-
uiShcd rom NeaI to year IN amounts
specified. the immediate commitment nc
ing final and definite. irrespective Of con
,4sf nltsiA a. iItHF
might obtain during the life OF the con-
tract Unless the likelihood OF lea-
sonaOIe and substantial prOft were hcii
out TO group could have been iound To
undertake contract of this size ana m
portance.
{ Accordingly We notified the INTERIOR
ough Company that We and our l'nlntdl.
ate associates would buy tht issue AT
GIL being on q basis To net TO MS J@s per
cent ncr annum Further. that we shohhd
plan to form q syndicate TO take thS
bonds At ~. reserVine 10 ourselves anu
associates a compensation OF ~ per cent
i'm return for our original undertaking 70
Jurchas" the bonds, for our WORK ~
forming and managing the syndlca.e' ana
for the general services rendered I'D Il
transaction of such magnitude ana com
Gespite the fact that at the time there
Were other large demands an thiS niarkyt
for rapid transit purposes. We iionp'IN
formed a syndicate. On WnlcH We part
pltet for the full amount. with ABOUT tWo
hundred and eighty participants. dOincsuc
and foreign. This syndicate. for Whicn
We shall exercise our best judgment VIII
profit TO lie extent that the price tess OK
penSesD at which the bonds are sold eA-
ceeds the syndicate's cost. And il is Ia
be noted that the InterbOroush Company
is to receive one-half Of any price oD-
tained for the bonds above.
There can be no question that inc en-
tire financing is for account o! the IN
terborough Company, and comes out OF
its fixed five cent rare
H. This transaction. in which our ana
has been sought. our idea mas beth 70
2crve the Inte,borOush Company upon me
hest terms at which II could reasonably
expect to secure it's FUNDS here or else
y here, and. at the same time. 10 salr-
guard the terms of the bond ISSUE ~
such a way that for the investor no ques-
tinn can properly arise as TO the sound
ness OF this security. ... -,