The silver state. [volume] (Winnemucca, Nev.) 1909-1925, 1914-08-18
WESTERN PACIFIC
MUST HAVE FEEDERS

With the announcement on the part
of the Denver & Rio Grande manage
ment that that company is prepared,
and has funds in hand, to pay the
semi-annual interest on Western Pa
cific first mortgage bonds under its
guaranty, the anxiety among the hold
ers of these securities is to some ex-
tent relieved, although the eventual
treatment of thesee bonds and the
contemplated capital adjustment is
still an open question.
The mere fact, however, that it was
determined to pay the interest matur-
ing September l, is an indication that
plans likely to be mutually agreed up
on are on foot for protecting to a rea-
sonable extent the Denver & Rio
Grande IS equity in its western exten-
sion. This means also that protection
satisfactory to Western Pacific first
mortgage bondholders will have to be
arranged.
The Denver e. Rio Grande has in.
vested $45 100000 of its funds in the
Western Pacific, all secured by liens
junior to the first mortgage, namely,
second mortgage bonds, unsecured
notes and stock. Default on Western
aPcific first mortgage bonds at this
time would seriously threaten the in
tegrity of this big investment, if in
deed it did not destroy the equity al
together.
AS stated previously in the Wall
Street Journal, these plans call for a
sealing down of Western Pacific
bonds, of which there are $5O,O00,0O0
outstanding, but under an arrange
ment whereby the first mortgage
bondholders are protected in their
lien against the property and it's earn
ings. The plan will also provide for
correcting the greatest weakness of
the Western Pacific, its lack of branch
lines and feeders. Not unlikely plans
will be made to raise $10,000,000 with
which to supply these facilities, deem
ed necessary to the future prosperity
of the property.
Western Pacific has shown its in
ability to meet its heavy fixed charges
or even the interest on tits first
mortgage bonds. This is largely due
to its lack of feeders, but also to the
fact that since the new management
took charge early in 1912 the neces-
sitv for making heavy repairs both
to road and equipment has cut ceris
ously into net revenues. In 1912 the
company earned only 1907 900 with
which to meet its $2,500,00O first
mortgage interest and $1,250,00O see
ond mortgage bond interest. In 1913
available earningc were only 81, ,405,-
00c and in the fiscal year 1914 avail
able net dropped to $697 900.
1t, therefore. appears that the prop
erty barely earned one years first
mortgage interest in three years ope-
rations, and nothing Tor interest on
$25,000,000 second mortgage bonds or
floating debt. which latter amounts to
over $20,0000O0.
Bankers, who will organize a com
mittee to ask for deposit of Western
Pacific first mortgage bonds and to
prepare and submit a plan for a re-
adjustment of Western Pacific IS
finances and the relation of the Den
yer & Rio Grande to that property, as
well as the eompany's officials, say
there are no strings attached to the
payment of interest on September I.
All bondholders viii get their interest
irrespective of whether or not they
deposit with the committee but it is
hoped and expected that some mutual
ly acceptable and equitable arrange
ment can be reached for renewing the
financial integrity of both of these
properties and placing their credit in
such shape that the Western Pacific
can finance its own new requirements,
of which the most important are con
struction of branch lines. 1t is point
ed out that the Western Pacific is q
single steam railroad, traversing long
stretches of unproductive territory,
while if the same plan had been fol
lowed as was followed by the Puget
Sound in constructing feeders, it
would now probably be self-support-
ing.-Wall Street Journal.