New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1914-07-22
New |. c. c. Rules for Ac'
counting Cause 1t to
Fall Through.
BONDHOLDERS MUST
ACT TO SAVE ROAD
Expense of Reorganization VIII
Fall on Collateral Trust
Bonds.

tOnS ana SOO''"VV'VVV III N"P
securities, which WAS adopted by
bondholders and stockholders protec-
tive committees on June 10, 1914, was
abandoned yesterday. According 10
statement iSsuel by the stock
holders committee, of which Will
lam l. Read is chairman, the fail
ure of the plan hinged upon the
question Of underwriting. which
could not be undertaken in view OF
revised balance sheet and estimate oil
the Chicago. Rock Island & Pacinc
Railway Compdny'S earnings. mauei
necessary for the accounting rules OF
the Interstate Commerce Comnl'sSivH'
which went into effect on July |. inns
statement was presented 10 'he oo'"
mittce on July L. ~
From the apparent voluntary WIN
Jrawal Of the stockholders commit
Too from the situation and state
mont issued By the bondholderS, com
mittec the expense OF Rock Island
rcorranization will now fall eNclu-
sivoly upon the collateral trust BOND
holders. Under the tentative plan
the stockholders were to participate
nv subscribing 10 new preferred
stock TO the extent of 10 per cent
Of their holdings.
The new rules Of the Interstate
Commerce Commission. which caused
the underwriting plan 10 iall through
,eouired the Rock Island TO make
heavier charges for depreciation OF
coninment. and when these charges
~ hocn revised il was found that
tho earnings did not make sum
ciently satisfactory showing as W
tho per cent dividends that were
intended TO be paid on the proposed
500 OOO 600 issue OF new preferred
.tock The stockholders protective
.owmittec then deemed il inadvlsapie
~ nroceed with the tentative plan
and the underwriting syndlca'e'
which was already oversuoserloeu'
was dissolved. .ho
William A. Read. chairman OF the
s,ockholders' committee. SAID tha'
Tho failure Of the tentative reaoJust-
mont plan did not necessarily mean
q, receivership for the Chicago. ROCK
Island & Pacific Railway in the near
f,tnre. lie explained that the com
nanv's needs had been PROVIDED lor
M 10 January l. 1913.
The bondholders' protective commit
toe. of which James y. Wallace preSi-
don't Of the Central Trust Company Is
cbairman. issued the following state
,,cnt in connection with the FAILURE o.
the tentative reorganization pian'
"Sincc the formation OF this commit
Toe il caused an examination or the
properties and accounts OF me Chlcago'
Rock Island e. Pacific Railway Com-
ronv 70 be made on its behalf. and ss
result of reports made 70 u, and alter
numerous conferences with the com
mittec representing the stock OF tnc
pork Island company. on June 20 l9l4'
announcement was made of tentative
agreement reached between TINS com
u,ittee and the stockholders committee.
In order to make the plan effective the
,asb requirements thereof about S3V,-
600. 600 had TO be underwritten'
con July p this committee was ad-
,ised by the stockholders committee
int the managers OF the syndicate
formed for the underwriting OF tne
esoresaid. although having underwrlt-
ton more than sufficient in amount, de-
clined to proceed because CD the
earnings Of the railway company Tor
the fiscal year ending June 30, l9lo' as
estimated by the accounting oihcerS o.
the railway company under the rules
for accounting prescribed by the Inter
state Commerce Commission, did not
mako 4 sufficiently satisfactory showing
as 10 dividends upon the proposed issue
Of preferred stock. and - adjustments
must be made in the capital for prop
critics account OF the railway company
which would largely decrease or posi-
bly entirely wipe out the surplus shown
on the books OF the railway company.
Failure 10 underwrlte the plan
necessarily causes the abandonment OF
the same and the termination OF the
agreement reached between this com
mittee and the stockholders commit
tee. The report of l.. W. Mckenna, the
independent expert employed by TINS
committee. shows that a large amount
OF money is necessary If the value OF
the stock OF the railway company is TO
be preserved. its earning power re-
stored and the properties kept from
reeeiyership. The financing Of the re-
euirements Of the railway company
since the formation OF this committee
has been OF temporary character. The
capital obligations OF the railway COM
psny and It's subsidiaries maturing
during the year ending June 80 1910.
amount 20 over 80 100000. and during
the year ending June 80. 1916. to over
Sil $50 900 New money is urgently
needed FOR the purchase OF equipment
ard other capital expenditures.
"The period OF grace IN the trust
agreement securing the collateral trust
bonds will expire on August J. Fore
!. closure proceedings hereunder should
v BE- instituted Immediately thereafter.
u Concert OF action by the holders Of the
y collateral trust bonds is essential il
the properties are . be preserved
Rather than return the deposited
bonds 10 depositors and dissolve the
committee. this committee has deemed
70 wise 20 ask for an Immediate de-
posit OF additional bonds. When de-
posted bonds. in the judgment OF the
committee. arc sufficient amount, and
financial conditions warrant, the com
mittee will prepare and submit plan
Of reorganization based upon the prin-
ciple OF giving the collateral trust
bondholders or imposing upon them
the necessity OF themselves providing
the money required.
"I,nder the terms OF the bondhOld-
ers' agreement, dated February 70
1914. depositors, after the promulga-
Won OF rutU pau may "'NHN' - F''N''
bonds IL such plan - not satisisctory
10 them. n by September -, 1914
sugicient bonds are not deposited with
the committee to justify it in It's judg-
rnent in continuing its efforts for re
orgsnizatiOn. the committee will dis
solve. and the bonds deposited may be
withdrawn. pursuant 20 the terms OF
the deposit agreement.
Failure By the collateral trust bond
HOLDER 70 unite may easily result IN
the ultimate receiveTship Of the rail