Evening star., 1935-08-31
DRIVE TO SPEED
RAIL PLANS DUE
Moves to Reorganize Some
of IS Roads Likely After
Labor Day.
Special Dispatch to The Star.

special DlSpatcn 10 Tne star.
NEW YORK, August Silt is ex-
pected that, after Labor day, there
will be inaugurated an effort to re-
organize some of the IS railroads
now in default or in receivership. AS
five systems, Missouri Pacific, Rock
Island, Frisco, Chicago g. Northwest
ern and Chicago, Milwaukee, st. Paul
81 Pacific represent about 70 per cent
Of the total mileage involved in bank
ruptcy and an even larger ratio to
total capitalization, the plans to be
put forward in the interest of their
security holders will receive most at
tention by committees, the Interstate
Commerce Commission and the courts.
Recently Federal Judge Wilkerson
IN Chicago cited directors of the Rock
Island to appear before him Septem-
Der II and show cause why they
should not be prepared to submit a
reorganization plan by November 1.
This road has been in bankruptcy
more than two years and has been
making no progress toward a capital
readjustment. The different classes
Of security holders have been at odds
with one another.
Other Carriers Cited.
The same is true in the Missouri
Pacific situation and in that of the
Frisco. 1t has been impossible in
both instances to present a plan that
would be acceptable to a majority of
any one class of bonds, mainly be-
cause the suggestions of the various
bondholders' committees have been so
much at variance with those of in
terests still in control of these prop
critics or with those of aggressive
minorities.
The troubles of the Chicago &
Northwestern and of the st. Paul have
been Of comparatively recent origin.
While each road has been represented
by committees with reorganization
plans, the controversy growing out
of their proposals has been mild and
the relations between different groups
fairly cordial.
The prospect of early capital re-
forms by several of these major sys-
TENS has been advanced by the So
called Eastman railroad reorganization
bill, which was passed by Congress.
This was drawn with the purpose of
quickening the legal processes associ-
ated with corporations controlled by
the courts. 1t supplements section n
of the present bankruptcy act dealing
with railroads in financial trouble.
placing in the Interstate Commerce
Commission and tire courts the power
to create and promote a plan of reor-
ganization If creditors cannot get to-
gether on an arrangement that would
be acceptable to majority.
Expected to End "Strike."
It Is expected to eliminate the
striking" bondholder, who has been
o costly nuisance in many of the re-
organizations of the last IS years, and
to take out of the hands of banking
houses the power to perpetuate them
selves in any new corporation or to
profit literally from reorganization
fees and the inside information that
goes with their position.
AS the old law has been interpreted,
D one-third minority Of all creditors
could block a reorganization plan of
recognized merit and justice to the
majority. Under the new statute the
]. c. C.. and the courts can compel
this minority to accept the plan If
they deem it in the interest Of the
largest number of security holders.
(Copyright. 1935)