Honolulu star-bulletin. [volume] (Honolulu [Oahu, Hawaii]) 1912-2010, 1913-03-18
Mainland capitaI SECURED


Mainland Capital Secured
The statement has been made that
the company watered its stock in 1902
to the extent .of 100000. Up to that
time the company had not availed IT.
self of it's manifest rights of stock
issue as against the cost of all Its
property, plus. twenty-five per cent.
even irrespective OF its indebtedness.
The cost at the close Of that year, a.
seen above, was $1,000. 1920. Shortly
before, the floating debt of the com
pany had climbed above 500. 10000.
Local banks had demanded the repay
ment of loans, while mainland and
local creditors were threatening the
company with attachment suits. Sum
dry local capitalists and financial In
stitutions were appealed to for credit,
I as Justified by our showing of operat-
ling earnings, but without avail.
We then turned for aid to financial
institutions on the mainland. One OF
them sent investigators to Honolulu,
and after exporting the company's &C
counts and establishing the cost and
estimating the earning power Of its
property, agreed to put the company
on its feet on the sole condition that
its existing bonds be cancelled and a
new issue be authorized large enough
to provide all probable future require
ments. This maximum was arbitrarily
| fixed at $1,000. 10000 by the bankers
who underworld the first portion of
the issue. For their own protection,
and that of their clients, and solely
because OF the Hawaiian statute which
limits corporation Indebtedness by the
amount of its capital stock. they de
manded that our outstanding stock be
increased forthwith to an amount not
less than the proposed authorized
limit of $1,0O0,O00 of bonds.
Increase In Stock
This necessitated in June, 1902, an
increase of our capital stock by $780,
900, which, together with all prior Is
sues, was amply covered by the cost
of the company's property, plus TWEEN
ty-five per cent.
/, In the following year the property
and franchise rights of the Hawaiian
Tramway Company, Limited, we're
purchased on a cash basis of $500, 600.
At the close of the year the cost of
the property of the railway, plus
twenty-five per cent, as shown above,
was S1.75O,963, or slightly more than
the combined par value of the stock
and bonds then outstanding. This re-
lation of stock and. bond issue, with
respect to the cost of the property of
the railway, has continued with an in
creasing conservative margin until at
the end of 1912 cost of the property.
without any added percentage, was
! 1908, 900, against which were out
Standing issues of stocks and bonds
aggregating only $1,79S,500. showing a
i large under issue of capital stock with
reference to the cost of the property
, exclusive of the additional twenty-five
per cent authorized by the franchise.
/ AS regards the present cost Of the
property, there was invested from the
sales OF stock $707, 500, and from the
sales of bonds $690,000. The balance
represents investment in its working
capital of sums otherwise applicable
to dividends and to reserves for re-
newals, extensions and sinking funds,
authorized. as lawful charges upon in
, come, under section II of the fran
chise act above quoted, and contribu-