Evening star., 1927-05-09
ERIE R.R. PROSPERS
WITH BURNET HEAD
Van SWeringen Merger Plan
Comes Before |. &C. Here
on Thursday.
BY j. c. ROYLE.

special DlSpatcn 10 Inc star.
NEW YORK. May 9.-The first step
in the financial reha bilita ton of the
Erie Railroad was taken today, with
the Offering of $5O,00O,O00 in per
cent refunding and improvement mort
gage bonds of the road by J. +. Nor
gan & Co, the National City Co, ana
the First National Bank. The sue
cess of the loan was assured before
it was presented to the public ana
practically all the issue was supscrio-
ed before or lmmedlately dLtei tA~
books were opened.
THE intent and effect of the bond
issue goes far deeper than mere
piece of refunding financing. 1t IS
connected in the most intimate way
with the bringing Of the Erie into
the Van Sweringen Nickel Plate Sys'
tenn. 1t is true that the proceeds
of the issue will pay off the Indebted
ness of the railroad to the Govern
ment and take care OF the t1oatlng
debt, but that is only part of it's pur-
nose that this issue is taken to meet
to overcome the objections made by
some of the Chesapeake & ONO
shareholders to the acquisition of the
Erie by that road. The first oblec-
ton has been made that the Erie
was a piece of junk. that its physical
condition and structure were such
that economical, efficient and profit
able operation was out of the ques-
ton.
Put Burnet in Charge.
The Van Sweringens have answered
this by putting John Burnet in as
president. Since his hand has been
on the reins. the physical operation
Of the Erie has been almost revolu-
tionized. economies of a startling char
acter have been effected and the opera
tions ratio has been largely improved.
The second objection Of the protesting
stockholders involved the price TO be
paid the Erie. This was fixed at $34
a share, and was declared by the OBJ
jectors to be too much to pay for
road which had paid no profits for
years. This, according to Erie and
Van Sweringen officials, has been ade-
quately disproved by the movement of
the stock in the open market. 1t
is now quoted at S55 a share, opening
today at 555s. This, it is contended,
represents the public estimate Of the
stock. since it is a proud boast of the
Van Sweringens that they have never
taken advantage of any plan in pros
pect to deal in the stock market.
The final objection has been that the
Erie was a financial curiosity, an i'm
pecunious railroad always with a
deficit. and that it's financial structure
was such as always to leave it with
no cash in the drawer. The present
move is directed specifically toward
meeting that objection. The new bond
issue will take care of all the floating
debt of the company at about 51a per
cent. Some parts of this debt have
been financed hitherto at 6 and per
cent.
Debt Closer to Rails.
The move does not stop there, nor
is it limited to the funding of $780,
900, 900 in obligations. The mortgage,
under which the present bond issue is
secured, is an old open ended mort.
gage, authorized as long ago as 1916.
AS other obligations mature or it be-
comes necessary to refund them, the
funds therefor will be secured under
this same open-end mortgage. This
will mean that instead of having
f0WarinR nile of noiScalla ne011S sncurj-