The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1934-10-30
Rail BOndhOlderS Look to Eastman;
Changes in La7CS Forecast for 1885
More Protection Aimed for
Stockholders in Re-
vamping Moves.
BIZ Times Special
NEu VODK

NEW 4ORh, CCI. oU-NAId4
amendments to the railroad section
of the bankruptcy act of 1888 are
slated for enactment at the next ses-
sion of congress, it was learned to-
day in an authoritative quarter as a
step toward early rehabilitation Of
the nations bankrupt railroads.
The chief change in the act, as
now contemplated in administrative
circles. the news source said, will
be with respect TO the rights and
voices of stockholders in the reor-
ganization of a bankrupt system. At
present the act stipulateS that two
thirds of the stockholders, in addl-
ton to the creditors of the bank
rupt, must approve a reorganization
plan before it may be made effec-
tive.
Amendment Considered
There is now under considera-
ton an amendment, one version OF
which would lower the two-thirdS
degree of approval. Another ver-
sion would eliminate entirely the re-
quirement oof approval by stockhoId-
ers and leave sanction Of reor-
ganization plan entirely up to the
creditors, the courts and the inter-
state commerce commission. One
school of thought in the administra-
ton would even omit the approval
of the creditors, it was said, but it
is not expected that its opinion will
prevail.
There has as yet been no COM
plete test of the reorganization ma
chinery provided for railroads under
the 1888 act. At the moment little
disposition is being shown on the
part of security owners of most
bankrupt railroads to bring them
out of bankruptcy, the general feel
ing being that present traffic lev
els are too low to provide a definite
base on which to plan new capital
organizations.
An exception is the st. Louis
San Francisco railway, which the
interstate commerce commission has
asked the federal court to declare
inSolvent. Should the court so de-
eide, the effect would be to allow
reorganization of the road without
requiring the approval Of the stock
holders.
Opposed Request
At a recent hearing on the Frisco
case in st. Louis the Reconstruction
Finance Corporation surprised OBJ
servers by opposing the commission S
request. 1t later was learned that
this was done in order to set the
case over until after congress had
met.
Interests representing the stock
control of the Frisco in 1888 wrote
a reorganization plan to which two
thirds of all the roads security hold
ers aSsented. Later some of the Sc
curity holders became dissatisfied
with the plan and, together with the
RFC, were able to force its cancel
lation.
Since then the stockholders have
baked at any reorganization which
would leave them out of the pic
ture. In government quarters it is
felt that, inaSmuch as the bank
ruptcy of the carrier occurred when
the stockholders we're in control,
they should not have voice in re-
organizing it. Bondholders of the
Frisco apparently not in sympathy
with this view have, likewise failed
to advance a reorganization plan.
Court Action Threatened
1t is to end such stalemates as
exist in the Frisco case that the adj
ministration is sponsoring amend
ments to the bankruptcy act. In
some sections of Wall Street the
opinion is that the administration
wishes to penalize the stockholders
of all bankrupt railroads on the
theory that it was their manage
ment and not business conditions
which primarily resulted in the
bankruptcies.
This is the real issue at dispute
between railroad bankers and the
administration, it is said. The har-
mony overtures which we're made
at the bankers convention in Wash
ington last week may result in a
settlement of the question.
If such a settlement does not &C.
cur and congress enacts the pro-
posed amendments, Wall Street may
carry the issue of stockholders
rights in reorganizationS into the
federal courts, it was said in re-
cr10rocib1n r1IartprS