New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-11-16
Du Point Plan to
Reorganize Halted
By Injunction
Rights Of Bondholders,
Court Rules, Might Be
Impaired

TRENTON, N. j., Nov. 15.-An in
junction interfering with the plan for
recognizing and financing the Z. l.
du Pont de Nemours Powder Company
Of New Jersey was granted to-day by
Vice-Chancellor Backes upon the !ap-
plication Of Francis s. Hoyt and other
bondholders. The court condemned
some features of the reorganization
plan as illegal and restrained the use
Of the corporate assets to retire capital
stock, as such an action would impair
the rights Of bondholders.
In arriving at his conclusions the
Vice Chancellor held that the bondhold-
ers had no concern in the proposed re-
duction of capital stock, whose Sec
ondary purpose was to reduce corpora
ton taxes, and, therefore. dissolve the
preliminary restraint against such re-
duction. The court showed that up to
1905, when the company began manu-
featuring explosives and allied prod
ucts, it was solely o holding corpora
ton, and that In 1905 it foated thir-
ty-year bond issue Of s16.oOO,O00, Sc
cured by a trust deed, imposing a
charge in favor Of the trustees upon all
its property, present and future.
Assets Mount Rapidly
When the world war broke out the
company began to make huge sums
from the manufacture Of military pow
der, so that by 1915, from a holding
company Of SS7,600,000 possessions it
had grown to a corporation having
more than 5000, ZOO, 900 of assets. Pur-
suing the reorganization plan Of 1915
the Delaware du Pont Company was
formed, with an authorized capital of
S24,000000, and purchased the bust
ness and property of the New Jersey
company for $120,000,000, paying for it
in $50 100000 of debenture bonds.
$50 900 900 of common stock and
81 100000 in cash.
The New Jersey company. halted in
It's scheme to dissolve, proposed to use
s26,000,000 Of the debenture shares to
retire q like amount of the $4,000, 900
Of its common stock, and proceedings
are under way to decrease the common
stock to s3,500,000. Vlce-C Chancellor
Backes showed that the accomplish
ment Of this plan would leave $1,000
900 in debenture shares and cash to
secure the ,unredeemed bonds and pre-
ferred stock.
Speculative Value Recognized
1t was charged by Mr.. Hoyt and the
other compliments that the debenture
shares. as after-acquired property, are
subject to the lien Of the bonded in
debtednsss and that the intended use
OF them would be a dissipation of Sc
curities pledged to the bondholders.
According to this view, Vice Chancellor
Backes said that industrial securities,
unlike investment in ordinary bond
and mortgage on land, have legiti-
mate speculative value, depending upon
the success or failure Of the enterprise
and reflected by daily quotations on
the exchange.
mo better illustration can be had"
the court says, than the rise in mar
ket value from $50 to sl02, of these
very bonds, the moment the reorgan-
ization was announced and it became
known that back of the bonds were
100000 instead of S27.800, 900.
And that such an event was probable
and contemplated by the New Jersey
company is evinced by the stipulation
In the trust deed that at any time be-
fore maturity the bonds were redeema-
bic at Sl10. OF this prospect, obviously,
the bondholders cannot be deprived"