The Birmingham age-herald., 1914-09-02
RECEIVER IS NAMED FOR THE TIDEWATER
 UPON THE PETITION
 OF THOMAS B. HALL
toontinued from Page Five,

tered into have been changed by the company and a modification of the con tract became inevitable. Meanwhile the construction company had proceeded with the acquisition of highly valuable fran. chises and rights of way in reliance upon the construction contract and had entered into contracts with Macarthur Brothers company, a sub-contractor, on the basis of cost plus 15 per cent and with Morris Brothers, as bankers. through whom it agreed to market the securities
 With these engagements outstanding. it was found impossible to modify the changed conditions until the construction and delivery to the railroad of the city division. In order to have an exact basis for the adjustment of the contract the construction company proceeded with the work required by the railroad com pany, all disbursements of every nature being scrutinized by the railroad company and carried on the books of the two com panies at their actual amounts, without profit or percentage. The bonds were charged to the construction company at the net amount realized by the construc- tion company under it's contract with the bankers; and 1t Is proper to state in this
 
 struction company for the securities on the basis provided by that contract the bankers have sustained a material loss. This statement does not have reference to the securities which were issued by the construction company in payment for franchises, which were not marketed through the bankers. Exclusive of the securities issued for franchises, etc.. there are outstanding $2,150,O00 in bonds, which with a a nv cta ac1x lad f,, by the construction contract have been accounted for to the railroad in cash ,at S21k
 Franchises Are Valuable
 The value of the securities paid for franchises and rights of way fairly rep resented cash outlays and expenses by the interests which had originally se- cured the same or similar franchises and rights of way. The franchises, including the 99-year franchise through the city oi Birmingham, was and is of great value and this franchise, with the other prop erty and rights of way acquired, were considered to be fully worth the value of the securities issued for same.
 Certain heavy items of expense by the construction company are found in It's subcontract with Macarthur Broth CTS company to whom a 15 per cent profit on $1.100,000 construction was paid, amounting to $165.000. To avoid this expense the construction company subsequently took over the work of construction and completed the work at cost. with no percentage added for profit.
 Additional heavy items of expense increasing the total bond issue are as follows: One hundred ninety-six thou sand dollars interest on bonds during construction and the unamortized bond ,n< ,tx,xr t,o hon 1e \ referred to above and amounting to $376,250.
 In addition to these expenditures the actual cost of construction proved to be largely in excess of the engi- neering estimates, due both to errors in those estimates and to the delays in construction incident to the unpre- ccdented depression in the marketing of securities which has prevailed during the entire period. Substantial expense has been sustaind in pushing the grad ing of the line from Fairfield in the direction of Woodward and Bessemer and in purchasing materials for the construction of that extension. No re- turn has been realized on this cost.
 "The result Is that the earnings from ope, ations will not be sufficient to pay interest on the bonds outstanding and at the same time maintain the property and service In the state of efficiency which the uniform liberality of the To- cal public toward the enterprise has made mandatory upon the manage ment.
 "The cnly remedy seemed to be the completion of the line to Besemer and the construction of material street rail way extensions of the system which would provide feeders for the present trunk lines and produce a materially increased revenue from operation, while reducing the undue average length of haul and car mile cost now obtaining These extensions could have been made at comparatively low cost The general attitude of the commissioners of the ciH of Birmingham to the extension was liberal and we feel assured that entirely reasonable franchise condi- tions would havc been imposed, but the lack of a market for the bonds and the delay which would have been incl dent to the acquisition of necessary rights over existing tracks into the business center of Birmingham have made the undertaking impossible in time to relieve the present situation The certainty that present conditions Will continue Indefinitely has forced the management to the conclusion that 1t would be improper further to meet the interest on the tonds by loans or other temporary cxpccients.
 For the rcarons stated, 1t has been determined that the company default in the payment of the interest coupons due September l. 1914"