Evening star., 1931-12-23

Continued From FIRST Page)
bonds, but these have been disposed of
and in many cases were actually
stolen" 1t is estimated, however. the
bonds now on hand will liquidate at
so per cent Of their face value.
Admitting. the bondholders' commit
tee has strong claims against the Smith
Co.. the plan proposes partial Subor-
pany in favor of those deposited with
the committee For example, if the
committee holds bonds on a certain
apartment house and the company has
some of the same bonds those held oy
the committee will be accorded the
greater consideration in liquidation.
Generally speaking. the company will
realize upon the first mortgage bond
1t holds, an amount equal TO so per
cent of the amount realized by the
public or the committee on the bonds
of the same issue held by it. That is
in a given case. if $500 is finally real
lied on a $1,000 bond OF a particular
issue, the Smith company would realize
$3.50 on bond of the same issue held
by it. Based on present values. this
settlement would result in the ultimate
realization by the company of approx
mortgage bonds.
Operates on Sliding Scale.
The percentage of subordination in
the case of each first mortgage issue
is not fixed but operates on a sliding
scale.
There are outstanding approximately
S8.235, 500 of the various first and re-
funding mortgage bond issues sponsored
by the former management of the Smith
company. These bonds were issued to
replace others already on the various
properties. In no case. however, were
the original issues entirely taken up
and they still stand as prior liens.
Of the first and refunding group. ap-
proXimately S6000,000 are represented
by the committee and SAIL 500 are held
by the company. The committee al
ready has filed claims aggregating ap-
proximately S4000,00o, growing out of
the issuance of these bonds. 1t is
claimed they likewise are subject to
subordination, and it is conceded this
claim may be we'll founded.
A settlement in connection with these
bonds also is recommended. providing
for a percentage distribution to the
committee of all funds realized on the
liquidation Of the assets of the COM
pany. including all amounts to be real
lied by the company on its first mort
gage bonds. The agreement fixes the
percentage Of the assets to which the
committee will be entitled at 40 per
cent.
Distribution Outlined.
The Smith Co. also sold two issues of
collateral trust bonds aggregating 81
100000. 1t is recommended that the
claims Of the holders of these bonds be
settled by giving them Is per cent of
all the assets of the company
The settlement agreement, therefore,
results in the distribution of the as
sets of the company as follows Smith
Co., As per cent; Roosevelt Committee,
40 per cent, and Collateral Trust Com
mittee IS per cent.
Included in the miscellaneous assets
Of the company are large number of
prom1ssory notes, evidencing loans
made by the former management, which
are classed as probably worthless"
The total value of these assets is
placed at approximately s5o,oOO.
1t also is proposed to bring suit
against Pitts to recover all funds and
of the company which came
into his possession. The letter says "the
probabilities are greatly in favor of
eventually obtaining and recovering
very substantial judgment against
Pitts"
Seek to Recover Bond.
1t is pointed out that suit already
has been instituted against the Hart
ford Indemnity Co. on a surety bond
protecting the company against the
defalcations of its officers. 1t is esti-
mated substantial amount will be
recovered there.
The stockholders are advised that
proceedings have been instituted to
obtain refund of income taxes pre-
viously paid by the Smith company,
on the ground that, during the period
when the taxes were paid, the company
had no taxable income. 1t is contended
the tax was paid merely to conceal the
true condition of the companys affairs
and 1t is expected to recover approxi-
mately Sl50,000 from this source. There
also Is on hand a small amount of
cash.
The bondholders committee has on
deposit $4,000, 700 of bonds covering 81
issues. The committee expects to SAL
wage substantial amount on many of
these issues, but declined to make any
SPECIFIC estimate for fear of giving in
formation to spectators.
Inc plan will be voted on by the
stockholders at a meeting in Whining
ton, Del, on December 80.
In a one-day street collection in
Glasgow, Scotland, $31,830 was raised