New-York tribune., 1919-07-02
Plan to Raise
@O0,OOO,000 for
Equipment Ready
Bankers Complete Outline
ofOrganization to Finance
Purchases Made bv the
Railroad Administration

only formal approval by the rail
road administration and the railway
corporations affected is now required
to make operative the plan prepared by
a bankers committee headed bv Jerome
j Hanauer for financing 100000, 900
worth of equipment ordered by the
administration. Details of the plan,
announced yesterday, show that an
equipment trust corporation is to be
created which shall issue S290,0O0, 900
8 per cent equipment trust certificates,
maturing in equal annual instalments
for fifteen years, and S14S 100000 Of
capital stock, which it is suggested
shal! pc subscribed for by the railroad
administration.
The object of the proposed national
corporation is to take up and finance
IN a single operation all or & large part
OF the cars and locomotives purchased
oy the government during the period Of
FGderal control and allocated by it to
the various railroad companies.
Would Make Public Offering
Assuming that the entire amount is
10 be financed, the bankers committee
purposes to sell the $4,000, 900 equip
ment trust certificates to the public.
The remaining $120,000,O0 worth Of
equipment and a reserve Of $2S, 900 600
would be constituted by the stock issue,
which is to be entitled to receive cumu-
lative dividends at the annual rate of
AZ per. cent and to the redemption OF
one-tiftcenth OF it's par value (S9,866,-
$3.50 per annum, but not until after
the maturing interest and annual in
stalments of principal have been made
upon the equipment trust certificates
croachment upon the reserve fund has
been made good.
"The excess of receipts over expenses
of the corporation are to be accumu-
lated as an additional reserve fund and
to be distributed as an extra dividend
upon the capital stock on the dissolu-
tion of the company" said an official
summary of the plan. The corporation
would take title 70 the equipment in
question and would execute agree
ments OF conditional sale with the va
rlous companies accepting equipment
which would obligate thems selves to the
equipment corporation to purchase the
said equipment in fifteen annual in
stalments, with interest at the rate Of
6 per cent per annum.
"The percentage of receipts over
fixed charges would be 46.41 in the
first year of the existence of the
corporation. declining to 1928 in the
fifteenth and last year of the life Of
the corporation.
"The certificates in the hands of the
public would in the first year of the
life Of the corporation represent only
SO per cent Of the purchase price Of
the equipment and at the end of the
five years would represent only ~ per
cent Of the purchase price
Excess Receipts
Attached to the committees report
is statement showing in detail the
position Of the equipment corporation
for every year from one to fifteen
years, assuming that the Obligations Of
all the railroad companies are prompt
ly paid This statement shows an cx-
cess of receipts over all charges OF
from S1,S0O,O0O in the first year to
$4,000 the fifteenth year, and an
aggregate excess for the lifetime of
the corporation of S14, 100000
Another statement disclosed that
even if SO per cent of the total obliga-
tions of the railroad companies should
be dcfaulted in every year the pro
posed corporation would be able to
meet interest and amortization pay
ments upon all of the certificates sold
to the public.
1t is recommended that the equip
ment trust certificates be offered for
sale through the bankers and other
bond distributors Of the country. The
sale it is recommended, should be
underwrtten by a nationwide syndi-
gate, which, it is urged, should be
paid a proper underwriting commis-
sion for its undertaking.