New-York tribune., 1922-02-19
The Fundamental Question

Since the announcement OF tho plan
tVE new factors have entered into tho
situation. An independent committee
has been formed which Is asking tho
deposit of either the actual rcfundinr
) per cent bonds OF the old company
from the holders Of such bonds as dill
not deposit them with the Harmon
protective committee, or for the deposi-
of the certificates Of deposit whicn
bondholders received who deposited
their refunding IS with the Hammo ord
committee. Another comm ttec has
been formed which is asking the
holders of the adjustment per ce1r
bonds to deposit their bonds. The
claim of these two newly formed con-
mjttees is that the Denvcr & R,o
Grande earnings are great enough. an
the future earning power OF the prop
erty is probably great enough 70 iustif
a less drastic reorganization.
The holders Of refunding 5s and ad-
justment Is. or of certificates Of d.
posit for these bonds, should recognize
the fundamental question about whca
the deposits has arisen: that is, tho
question whether the railroad property
can earn sufficient to pay the interest
Oh all of its present bonds and leave Il
large enough margin over so that the
company viii have credit TO sell add
tional bonds to meet its requirements
for rehabilitation and future develop
nent. Superficially from the past re-
ord of Denver & Rio Grande earnings,
it would appear that the property hal
sufficient earning power to JuStii.
leaving the financial structure as l.
now is. but holders of refunding 5s and
adjustment Is should not take d super
fetal view Of the past record.
Net earnings are arrived a after
paying the cost of running the trains
and also after paying the cost OF re
ncwing rails and ties and repairing
locomotives and cars A railroad prop
crty can be 50 undermaintained AS u
leave it a mere she'll. 1t is matter Of
pretty general belief that under the
Gould regime the Denver e. Rio Grande
property was undermaintained, that l..
il was allowed to dcterlorate IN order
to show larger net earnings than could
have been shown had the necessary
amount been spent for renewal OF ties
and rails and repairs on cars and loco
motives.
The holders, thereforefi. of the re-
funding bonds. and also the holders o.
the adjustment bonds ought to make ar
analysis for themselves OF the earnings
Of the Denver & RIO Crandc Tor inc
past year and decided whether or not
II is to their best interests to accept
what appears on paper to be large
loss, with the belief that in the long
run tine property, if not compelled to a
starvation ration of maintenance. wall
develop earning power and credit which
will max the new company's preferred
stock and eiunior bonds worth more
than the refunding. and adjustment
bonds are new.
If they think that they would prefer
to 20 in on basis such as this they
should hold on to their certificates OF
deposit of the Hammond committee. or,
if they haven't deposited their bonds,
deposit them with that committee.
If they think that the past record
of the Denver & Rio Grande is such,
even upon analysis, as TO Justify the
policy Of allowing the refunding and
adjustment bonds to remain. and If
they believe the company Will be abls
to do its future financing, they should
accede to the request of the newly
formed committee. Of which James II.
Perkins is the chairman. If they hold
refunding 5s or certificates OF deposit
therefor. or Of the untermyer commit
tee if they hold adjustment Is.