Evening star., 1925-08-22
MORTGAGE BONDS
AS INCOME GARNER
Babson Discusses Invest
ments in Connection With
Business Reorganizations.

BABSON PARK. Mass, August %.
When securities are high, AS at pres
ent, investors naturally look about for
opportunities that would not other
wise appear attractive. % Roger w.
Babson suggests that bond issues in
the process of reorganization often or
Sfer an opportunity for both safe in
tvestment and for good profit In con-
,nection with this he yesterday issued
the following statement =
Several congratulations which have
been under consideration for long
time are now being announced, some
officially. Others unofficially. Among
those which have created the most in
terest is the Virginia Carolina Chemi-
cal Co, the first mortgage 7 per cent
bonds of which defaulted about two
years ago and which sold in the SOS
shortly after the default.
Reorganization Plan Outlined.
''The proposed reorganization plan
provides for giving these bondholders
about $500 in cash. $500 prior prefer
red stock and the overdue interest in
other preferred stock and, possibly. for
the paying off of the bonds entirely.
The result of this is that the bonds are
selling now approximately at par. the
highest price in their history. 1t is
rumored that bonds which are not de
posted will receive from the court par
and interest, although this is not Off
cial. Even the debenture TVS, which
sold in the eos are now selling in the
Sos.
Another instance is in the case of
the American Writing Paper Co, the
first mortgage bonds Of which sold
very low shortly after their default
and are now selling again in the Cos.
It is understood that the holders Of
these first mortgage bonds will re-
ceive a new first mortgage bond for
$500 and about $500 in new preferred
stock.
'One of the most interesting now
cases is that of the New York and
Cuba Mail Steamship Co. commonly
known as the Ward Linel, the first
mortgage per cent bonds of which
have been in default for some time.
Cites Pessimistic Stories.
Very pessimistic stories were! told
about these bonds after their default.
and they sold for about 80 cents on
the dollar, but $500 now is bid for
undeposited bonds, and the rumor Is
that those who hold out Will get par
and interest. OF course. it will be
recognized that in all OF these in
stances l mention the first-mortgage
bonds.
in the case of companies which
had consolidated mortgage or deben.
ture bonds these Junior issues have
not turned out SO well. This was very
clearly illustrated in the case of the
Riorddn Paper Co. rganization,
where the first mortgage bondholders
received the equivalent of par and in,
terest, while other security holders
received almost nothing. unless they
were willing to put up more money.
Among the larger railways which
have been in the hands of Il receiver
for time is the Denver and Rio
Grande. This company was in the
hands of a receiver some time before
the reorganization plan was an
nounced, and even now the new Sc
curiues are not yet distributed Yet
during all these years interest has
been paid on certain first MORTGAGE
issues, while junior issues have been
In default.
st. Paul Hallway Problem.
The reorganization plan which. is
receiving the greatest interest at the
moment isthat Of the Chicago, Mil
waukee and ST. Paul Railway Co.
Here is a case where. by q peculiar
incident, a first mortgage bond issue
is not receiving d fair treatment in
the minds of many people ! refer
TO the Puget Sound first mortgage IS.
If these were all outstanding in the
hands of the public so the bondholders
could get together and take over the
property they would he getting their