Evening star., 1934-11-27
.SEABOARD'S DEBT
POLICY DEPLORED
Observer Believes Action of
Receivers Has Set Bad
Precedent.
BY CHARLES r. sPEARE.

Special Dispatch TO The Star.
NEW YORK, November 27.-Four
years ago, lacking one month. the
Seaboard Air Line Railway became
bankrupt and receivers we're ap-
pointed to administer its affairs.
There followed one Of the most COM
plete defaults on the securities Of a
corporation on record in American
financial history. The sequel to 1t is
instructive in suggesting the present
attitude Of some debtors toward the
payment of their obligations.
Under a plan agreed to by from
10 to 80 per cent of the different fixed
interest issues Of the railroad, pay
ment Of coupons on all the company's
general mortgage bonds and notes
and on all its underlying divisional
bonds was suspended for period OF
three years from 1882
1t was assumed that, at the end
of this term, conditions would be so
much improved that a reorganlz2-
ton satisfactory to the security
holders could be effected and the
company placed in a condition to
operate with profit.
Recent Balance Cited.
One provision Of the agreement w
that all equipment trust certificate ii
stallments maturing through l9e
should be refunded in three-year re-
ceiver certificates, and the receiver
we're relieved Of payment Of principal
on equipment trust obligations and
underlying bonds maturing prior to
February !. 1885.
Not so long ago the cash balance
OF the Seaboard Air Line Railway
was understood to have been in the
neighborhood Of 100000. In spite
Of this no attempt has been made to
raise the status Of the defaulted Sc
curities. Actually it now appears to
be lower than heretofore. The re-
ceivers have just informed commit
tee representing the Sl2,775,000 first
mortgage 4 per cent bonds that they
will not have funds sufficient to pay
the principal of the receiver certifl-
Gates maturing next February, nor
will they be able to meet the equip
ment trust maturities falling due then
or to resume payment on the underly-
ing divisional bonds. In other words.
their action suggests prolonged era
Of default Strange that the COM
peting Atlantic Coast Line could this
week resume dividends on its stock.
REGARDED as Extreme,
In the Seaboard Air Line situation
the principle Of default is to be car
ried to an extreme degree Hereto
fore receiver certificates and equip
ment trust certificates have quite
generally had clear record in rail-
road bankruptcy cases. The proposal
Of the Seaboard Air Line receivers
cuts deeply into this record and es-
tablishes precedent that is highly
injurious to section of thc railroad
investment field that has been re-
garded as almost invulnerable.
/ 1t in effect confesses the inability
or the unwillingness of the present
operators of this line to the South
I to save enough from their operation7
/ to pay more than labor and materials
costs and taxes.
4 This does not look reasonable to
I the large body of investors who have
been without income for four years
and are threatened with another pc
riod Of default Nor does it square
with the fact that, out of the opera
tions in the last four years. and IL
spite of liberal application of earn
lngs to maintenance, the receive
were able at one time to show bar
balances nearly sufficient to have CO.
cred full interest on all bonds in 1882
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