The sun. [volume] (New York [N.Y.]) 1833-1916, 1914-04-28
NY. CENTRAL BOND
PLAN Is APPROVED
Interstate Commerce Commits
sion lndorscs Proposed
Consolidation Project.
WOULD EFFECT ECONOMY
Facility in Future Financing
Also Warrants Action, In
vcstigators Believe.

WASHINGTON. April 27.--The Inter-
state Commerce Commission. in a re-
port sent to the Senate to-day at noon,
approves the issue Of bonds by the New
York Central Railroad in connection
with it's consolidation plans. This is
the first time that the commission has
ever ruled on issues of securities by n
railroad.
The commission says that it seems
probable that by the consolidation a
substantial saving can be effected. and
that from the standpoint e economy in
operation and facility in the future
financing of the companies the con-
solidation is warranted.
The commission says in part:
1--WE think that from the standpoint
Of economy in operation and facility in
the future financing of the two COM
panies the consolidation is warranted
Neither the consolidation itself nor the
exchange of bonds on the bas'. OF in
creased interest rate indicated incident
thereto would. so far as we are advised
offend any Federal statute. Tho ques-
ton whether the exchange Of the Lake
Shore collateral bonds on that basis Is
warranted will be answered by our
reply to the Senate resolutions further
question, whether the exchange as pro-
posed is necessary even though the con-
solidation OF the two companies be
found unobjectionable.
Necessary to Consolidation.
1--WE have stated that. in response to
the New York Centrals first offer TO the
holders of its Lake Shore collateral
bonds OF a mortgage security for their
bonds in consideration ior their consent
to the consolidation, v.'nscnts repre-
senting only about $50, 100000 Of the
required S67 ,933.S00 were received. on
the date the taking of testimony before
us was concluded most of the required
consents had been secured under the
New York Central's second offer OF
an increased interest rate in addition
to that security. We have been since
advised by the New York Central. by
letter. that the necessary consents have
been received. We think that as prac-
teal matter the exchange of the 3H
per cent. Lake Shore collateral bonds
for per cent. consolidation mortgage
bonds is, under the circumstances dis
closed. a necessary step in the carrying
out OF the proposed consolidation plan
as outlined to us by The New York
Central"
The investigation Of the commission
was directed by Senate resolution.
which asked the commission to express
opinions as TO the whole transaction
involved in the bond issue and con-
sOlidation. The resolution intimated
that the consolidation would be in vio-
lation Of the Sherman act. Concern
ing such violation the commission
says that this question is one that can
more properly he passed upon by the
Department Of Justice. but it adds:
However. 1t would seem that II this
ownership of stock in parallel lines by
the New York Central and Lake Shore
violates the antitrust law, the offence
Is as complete now as it would be after
the consolidation"
The New York Central proposes to
issue per cent. bonds to the eXtcn,
of slGT.l02.400 instead of 3la per cent
bonds to effect the consolidation. and
this phase of the matter the commission
was particularly asked to inquire into
List of COmpany's Bonds.
The sl67.lOo 400 Of bonds constitute
the total of the New York Central.
Lake Shore collateral bonds for 500,
bIS.400, issued in 1898, to mature II
100 years. in payment for about 90 pei
cent of the stock of the Lake Shore a
$500 share: its Michigan Contra
collateral bonds FOR $685. 900. ISSUED
In 1898, to mature in 100 years. in pay
ment for about 90 per cent. Of tn,
stock of the Michigan Central at STA
share: its debenturc bonds for s4S,
100000, issued in 1904. to mature II
thirty years: and its debenture bond
for S3,1SS,000. issued in 1912, to matur,
in thirty years.
The Lake Shore an! Michigan Contra
collateral bonds bear interest at 3h pc
cent: the debenture bonds at pc
cent. The par value OF the stock pur
chased as above shown is 500 a share
The Lake Shore collateral bonds ar
secured by pledge of the Lake Shor
stock, and the Michigan Central CO!
lateral bonds by pledge of the Michigan
Central stock for which they wer
issued in payment.
None of the bonds mentioned, col
lateral or dcbenture, IS secured b,
mortgage. but as to all OF them, tn
New York Central is bound by covenan
contained in the respective indenture
under which they We're issued to secur
them I'm any future mortgage which