Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1919-06-27
TRUST FUND URGED
FOR SHIP PURCHASE
Selling Of Bonds for Divisional
Ownership lndorsed by E.
r. Shanbacker
PLAN USED BY RAILROADS

The application Of the equipment
trust plan for raising money to pur-
chase ships is suggested by r. F.
Shanbacker, president of the Fourth
street National Bank, as a method for
financing a merchant marine.
The idea isN. to sell bonds for divi-
sional ownership of ships to operate
from this port throughout the world.
Virtually the same plan has been used
to equip other industries and he be-
lieves it would succeed in the merchant
marine.
Speaking on this topic, Mr.. Shan
hacker said:
Gar trusts or equipment trusts
made use of by railroads all over the
country for the purchase of cars and
locomotives, are Philadelphia prod
uct. They have been in use for a
good many years and so far as l know
no loss to investors has occurred
through the purchase of equipment
trust certificates.
Used by Railroads
"As made use of by the railroads,
following what is known as the Phila-
delphia plan, the purchaser of the
rolling stock advances a small part of
the purchase money. Then the trustee
holding title to the equipment, issues
= certificates payable in definite amounts
yearly for a period of years. The rail-
road obtains the use OF the equipment
at once and makes payment at stipulated
dates to the trustee of interest and an
additional sum which is sufficient to
provide for paying the trust certificates
as they mature from year to year.
"These payments made by the rail-
road are equivalent to rental for the
use of the cars or locomotives and at
the time of payment of the last of the
series becomes vested in the railroad.
"When the indenture fs drawn it con
tains provisions which fully protect the
investor, requiring, for instance, that
the equipment shall be maintained in
good condition and that if any of it is
DESTROYED it shall be replaced. There
is provision also for insurance. Equip
mept trust certificates have been in high
favor with investors, the interest rates
generally being attractive, and the Sc
curity is such that the investor feels
protected, no matter what may be the
credit of the railroad for whose use the
equipment is bought.
.'Other bankers are considering, with
! myself, the application of this principle
to the construction of ships. Suppose
man goes to one of our local shipyards
and says he wants a vessel built which
will cost 5000, 900, but the buyer has
only $500, 900 to put into the project
mn IL =
a banker and he cannot supply either
the money or the credit for the balance
needed to construct the desired ship. IL
that case the contract is not entered into
"But right there the trust certificate
plan might fill the gap. The ship buyel
could apply the capital which he ha
. available and investors by PURCHASING
the certificates would supply the bal
apce, thus accommodating the purchase
! and helping the shipbuilders to obtall
additional contracts.
Used in West
"The thought is too new yet to p'
fully considered, but we are trying u
work out some practical method. Th
principle has been applied to ships bull
for use upon the Great Lakes, ships con
structed for subsidiary of the Cam
bria Steel Company having been St
financed. But those ships were only uset
in inland waters and there were no in
ternational complications, such as NIGH
arise when ships navigate the oceans
Ownership should not be vested in tn
possessor of the certificates, as the haz
ard would be too great when ships pl,
the seas and enter foreign harbors. Blu