Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-08-24
ST. PAUL ACTION
MAY HAVE EFFECT
New Financing and Mergers
of Other Roads Involved
in New Move.
By j. c. ROYLE.

Special Dispatch to The star.
NEW YORK, August 24-Security
holders in a score of railroads which
owe money to the Government check
ed up today on how remission or
refunding of their Federal debt might
affect new financing and proposed
mergers. The possibilities in the case
of many less prosperous roads were
brought sharply to the fore by the
action of the bond defense committee
of the Chicago. Milwaukee and st.
Paul road, which asked delay from
the District Court of Illinois in sell
ing that property and reorganlZinS
the company.
good many of the stock and bond
holders of the debtor roads feel that
the carriers are in a somewhat sim
liar position to that occupied by the
foreign nations which secured war
loans from the United States. They
assert, although this position was
not taken by the st. Paul petitioners,
that the roads were taken over by the
Government under stress of wartime
necessity and that as a result of this
action the loans became necessary.
These loans were provided. but at
definite rate of interest. while the
carriers were also restricted by Fed
eral control of rates and the percent
age allowed to be earned on valua-
ton
Roads Have Good Half Year.
The class ! railroads as a whole
have had a wonderful year and
half Railroads are at the highest
average prices in recent years. SO
far as physical condition is concerned,
the carriers are in better shape than
hnfnrn rfhp r9JliarS in tho first
six months of this year are estimated
to have earned 100000 900 more than
in the corresponding period of 1925.
But not all the class one roads have
made profit. Freight traffic density
in the case of most roads has increased
but so have operating costs. The
money makers have been made so by
efficiency of equipment and operation.
Some roads have not been able to
earn fixed charges. In certain cases
this is due to heavy funded indeht-
edness Others have been" on the
border line. Security holders of some
of these say that a decided amount
of relief would be evidenced in their
position if the governmental debt
were treated in a more lenient way
and that a large amount of refinanc-
ing of maturing bonds could be
avoided.
Other financial experts believe that
where a major operation is necessary
it is foolish to delay it, The relative
valuation placed on the property is
major factor i'll arriving at de
cision as to the future financial needs
of each road This is clearly evil
denced in the affidavit of Edwin G.
Hameson for the bond defense com
mittee in the st. Paul road. In it
Mr.. Hameson demands a thorough
expert examination of the road In
order to determine the upset price
of the st. Paul property. He con-
tends it should not be less than $780,
600 900 whereas his opponents, in
their plan of reorganization, fixed the
figure at 500 100000
Consultations of rail lines now
being considered may be vitality af-
fected by these and other questions,
no matter what action may be taken
in the ST. Paul case by the Illinois
District Court Certain valuations
and financial proposals looking to the
consolidation of many lines have al
ready been vigorously contested by
some of the security holders of the
smaller and less prosperous roads.
These protests undoubtedly will be
given full consideration by the Inter
state Commerce Commission In rul-
ing on the proposed mergers. The
tentative consolidation plans of the
commission have already been prac-
tically wiped out. since announce.
ment in 1921 by a combination of
events. and the new combinations
therefore seem likely to be a good
deal dala we'd