Evening star., 1932-06-25
RAIL CREDIT PLAN
EXTENDED FURTHER
Federal Agency viii Lend
100000, 900 to Insure
Interest Payments.
BY CHARLES F. sPEARE.

Special Dispatch to The Star
NEW YORK, June 25-The credit
status OF those railroads that are hav-4
ing difficulty, under the unprecedented
decline in their traffic, in meeting their
current fixed charges has been improved
by the announcement of President
Buckland of the Railroad Credit Corpo-
rationa that his organization will assist
such roads in meeting the service of
their debts this calendar year. 1t will
cooperate with the Reconstruction Fl
nance Corporation and the Interstate
Commerce Commission in this effort,
which will involve loans to needy sys-
TENS aggregating $4,000 900.
OF this amount the Railroad Credit
Corporation expects to be able to sup
ply $50, 900, 600, with the balance Of
sac 600, 900 provided by the Reconstruct
ton Finance Corporation. 1t had origi-
nally been expected that the increase in
freight rates granted by the Interstate
Commerce Commission last October as
a temporary emergency measure"
would realize to the carriers between
s100, 900, 600 and $125,00O 900, and that
with this sum they would be able to
assist themselves without much help
from the Government.
Coal Shipments.
ACTUALLY, Tie IeSulIS Ol Llic
increase have been disappointing. It
has been found that a considerable
amount Of traffic has been lost to trucks
by the carriers because of the new rate
schedule, and that even some Of the
heavy commodities like anthracite coal,
stone and gravel are being transported
long distances on the highways. There
Is a substantial amount Of anthracite
coal being moved out of the Pennsyl-
vania mines into the New York sub
urban territory as well as into Western
New York. Instances were cited today
of heavy building stone being conveyed
from Vermont to this region by truck.
The statement Of the head OF the
Railroad Credit Corporation that his
agency is prepared to meet the fxed
charges Of all carriers this calendar
year lifts the cloud of doubt that has
hung over the July l maturity OF the
St. Louis-San Francisco Railroad.
When this system made application to
the Reconstruction Finance Corporation
last April for loan of slightly under
sI3,000,000 the Interstate Commerce
Commission took what was regarded as
an unusual position toward the appl-
cant. 1t, in effect, practically chal-
lenged the right of the carrier TO ex-
pect financial relief from the Govern
ment until it had shown disposition
to place its financial house in order.
Although the commission had some
years ago approved plan Of rehnancing
by the Frisco, under which it gave up
income bonds for fixed interest obliga-
tions, it expressed the opinion that the
Frisco would always have a low credit
so long as its capital structure was out
of balance. 1t insisted therefore upon
the road presenting a plan before July
L vuhiPh TOJfld PnTToPf this condition
For the past two months the man
agement of the Frisco, its bankers and
the largest holders of its junior bonds
have been working on q plan to meet
the objections Of the commission. A
hearing before this body was held a
short time ago. 1t is known that sew
eral proposals were made and that the
first two we're not found agreeable TO
the bond holders. The one on which
as its major feature suspension for
period Of years Of interest payments
aggregating about S12,o00,000 annually.
This is in lieu of exchanging fixed
interest bonds for income bonds, pro-
poSal that did not meet with the accord
OF the commission. It is understood
that the examiner for the commission
has prepared an elaborate brief on the
Frisco situation, In which the fact Is
b4ldb ACdAAy ~ JCdA6
the commission has, from time TO time,
suggested to the carrier that It
strengthen its financial structure.
r. +. c. Loans Discussed.
Further discussion has been heard OF
the possibility of the Reconstruction
Finance Corporation using q portion of
its proposed new capital In loans to
carriers to buy IN their deprecated
bonds. This has given more strength
to the market for issues Of this char
acter. The proposal finds many strong
advocates, who believe it would be the
best solution for a speedy restoration of
the market for issues recently selling on
basis of between 10 cents and 80
cents on the dollar. The amount OF
Reconstruction Finance Corporation
loans applied for by railroads TO meet
maturing obligations has reached the
sum of approximately s375, 100000. OF
these applications, about SITS, ,00o. 900
have already been granted.
(COpyriRht l039