New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1921-09-11

CanaOa OF nail or Its railroad mile
will continue to be owned and opera
The capitalization Of the Grand
Trunk consists of 924,7s7,761 ordinary
stock. Sl2,500.000 per cent guaran-
teed non-cumulative stock, e3 400 900 5
per cent first preference stock, 60 $780,
600 S per cent second preference stock
and s7,16s,055 per cent third prefer
ence stock. Nearly all of this stock is
outstanding. The total funded debt of
the company, exclusive of equipment
trust notes and exclusive of the S25,-
100000 twenty-year per cent bonds,
guaranteed principal and interest by
the Canadian government and sold in
the United States, is 235,661,315.
The purchase bill, so-called. which
was signed by the Governor General of
Canada in May, 1920, and the agree
ment entered into between the govern
ment and the company provide that
the government guarantee interest on
the per cent Grand Trunk debenture
stock to The total amount outstani-
ing OF S31 ,926,125 and guarantee in
terest on the e12,500,000 a per cent
guaranteed stock and assume the
funded debt OF the company.
The only security of the Grand Trunk
which is actively dealt in on any large
scale in New York is the per cent
guaranteed United States dollar bond
issue, which remains unaffected one
way or the other by the arbitration de-
cision, since they were from the first
direct obligation of the government.
The greater part Of the securities of
the Grand Trunk, both stock and bonds,
is held in England. The chief interest,
therefore, IN the arbitration decision
lies in the light which it throws on an
American experiment in governan emit
ownership. The accusation which Eng
iiish stockholders of the Grand Trunk
have reiterated from time to time while
the arbitration proceedings were going
ON is that the Canadian government
treatment of stockholders of the Cana
dian Northern, because they we're
largely Canadians and influential in
Canadian politics, was very different
from the way in which the Canadian
government treated English security
holders in the Grand Trunk, who were
comparatively without political infiu-
ence in Canada. There is no doubt
thar politics has played large part
in the Canadian railroad situation ever
since the first railroad lines were built
in Canada. But this is not the equiv
aient OF saying that the arbitrat ion
award in the Grand Trunk case was
unfair.
Situation Complicated
The Canadian situation is extreme
ly complicated. A brief historv of
the events that have led up to the
present situation Is essential to an
intelligent discussion of 1t.
The Canadian Northern dates back
TO 1889, when the Lake Manitoba
Railway G. Canal Company and TIE
winnipeg Great Northern we're ANAL
gamated. The Grand Trunk was in
c &C IN 1852. but it was not until
the Grand Trunk Pacific was incor-
porated In 1903 that the Canadian
Northern and the Grand Trunk be-
came potential competitors with each
other and with the Canadian Pacific,
The Grand Trunk. through it's sub
sldiary, the Grand Trunk Pacific. UNI
dertook to build an all Canadian
transcortinental, the eastern end of
which was to be formed by the Ma
tional Transcontinental, a road which
the Canadian government itself un-
W Duiio. TloT 60 13uo, the
Canadian Northern had been operating
isa lines probably and without seri,
GUS competition. The Grand Trunk
Pacific undertaking, however, brought
2 competitor into the Canadian North
INNS territory.
ThS Canadian Northern MANAGEMENT
saeelted and still asserts that they were
forced in self-defense to extend their
lines both east and west by the action
OF the Canadian government and the
Grand Trunk. At any rate, they did
extend their lines and built trans
continental partly through Dominion
aid, partly through provincial aid and
in part through the private financing
which Sir William Mckenzie and Sir
Donald Mann were able to do in
Canada. The road was built when both
money and materials were cheap. The
capitalization Of the road consists of
approximately 500 600 900 common
stock; approximately $25,000,000 con-
vertible debenture stock, and $126,302,-
600 funded debt This debt largely
consists of 8, u and per cent bonds
The Grand Trunks agreement with
the government provided for the gov
eminent guaranty of some of the
Grand Trunk Pacific securities and the
Grand Trunk guaranty Of others. II
also provided that the Grand Trunk
should take over the operation of the
National Transcontinental. When, how.
ever, the National Transcontinental was
ready for operation the Grand Truni
refused to fulfill it's contract. Further
more, when the Grand Trunk Pacific
failed to earn enough to meet its inter.
est charges the Grand Trunk refused
to make good its guaranty of Crane
Trunk Pacific bonds. This threw ths
whole burden on the Canadian govern
ment and lea6 co the decision on the
part OF the government to take owe,
the whole system, Grand Trunk as vel
as Grand Trunk Pacific and Nationa
Transcontinentai. In the meantime
thesCanadian Northern had gotten int
such deep financial waters as to neces
state continual applications for gov
ernnent aid, and this lead 20 the gov
ernment's decision to ike over Thay
property.
As in the Grand Trunk case later
arnitrators were appointed to make al
appraisal Of the value of the common
stock of the Canadian Northern, which
was owned or controlled in greater ear
by Sir William Mckenzie and SiI
Donald Mann. The vale Of the stocl
was found to be S10,S00,000, but tn.
price actually obtained was sic, 0Oo. 900
or on the basis of S16.66s2-S per share
For this purchase price the government
got 9,6S6 miles of railroad, subject tt
Sl26,302 900 funded debt. The funded
debt. therefore, was at the rate of ap
proximately $4,000 per mile.
E~rx II T-E