Evening star., 1935-02-05
MAYFLOWER HOTEL
..ORDER HELD BACK,
|REYNOLDSASSERTS
Senate Chairman to Ask
Special Master to sit
on Case.
DECISION IN BANKRUPTCY
! CASE HELD PREMATURE
Will Recommend Each Bondholder
Be Asked Opinion on Dis
posal Plans.

Senator Reynolds, Democrat, Of
North Carolina, chairman of a Senate
committee investigating financing Of
the Hotel May1ower, announced TO-
day that he had received assurance
from Justice F. Dickinson Let's of the
District Supreme Court that operation
of the Mayfiower reorganization order
would be held in abeyance temporarily.
The Senator said he would recommend
appointment of special master to sit
on the case.
Reynolds yesterday criticized the ac-
ton of the court in deciding the bank
ruptcy case without waiting for COM
pletlon Of the senatoriar investigation.
Reynolds will recommend that the
special master see each of the bond
holders of the hotel property on their
preference for one of two offers now
open to them and follow the majority
decision in deciding disposition of the
hotel.
New Company Proposed.
Specifically, the two offers are these:
The first offered by the Majority
Bondholders' Protective Committee
proposes that control of the hotel be
vested in a new company directed by
three voting trustees and the Amer
ican Security & Trust Co. The bond.
holders are to receive S4450.000 in
new per cent 15-year bonds. They
will receive also stock in the new cor
hnndc will
be delivered in units of 10 shares OF
stock to each 81 900 bond. At the
same time the new company would
take over 100000 in cash now on
hand as accrued profit of the hotel
during the past two years. OF thi,
amount 100000 would be held as
operating capital and the remaining
S500,000 would be devoted to paying
expenses of receivership, litigation and
other expenses. No cash would be
given to present security holders. their
sole receipts being the new bonds and
stock.
Control of the new company would
remain in the hands named above for
period of two years, with the option
to renew for eight more years if agree
able TO 81 per cent Of the stockholders.
Sale Also Suggested.
The alternative is the outright sale
of the hotel property to the Manger
Hotel interests at figure of $4,000. 900.
OF this amount, s1,000,000 would be
turned over in cash to present bond
holders. and the remaining S3000,000
would be distributed in the form of
new 15-year 5 per cent bonds. At the
same time the 100000 now held by
the company would be distributed to
the present bondholders.
Senator Reynolds announcement was
made this morning after the committee
had heard further testimony from
Joseph Low. counsel for minority first
bcndholders. Following his announce
ment the committee adjourned until
this afternoon, when they will hear
Paul E. Lesh, counsel for the majority
bondholderS' group, and a representa-
tive of the Manger Hotel interests Of
New York.
The court order issued about a week
ago would have placed in effect the
reorganization plan offered by the
Bondholders' Committee. The Sem
ator said his recommendation prob
ably would be drawn tonight or to-
morrow morning and upon approval Of
other members of the committee would
be made to the court at once.
Meanwhile, Senator Reynolds has
drafted two proposed amendments to
section 77-B of the bankruptcy act.
The first of these would prevent brok-
erage houses from instigating reor-
ganization and would call for appoint
ments of special masters in bank
ruptcy cases similar to this one. The
second of the amendments would re-
quire the deposit of bondholders' lists
with the court in bankruptcy cases.