Evening star., 1935-07-11
INVESTORS STUDY
DATA0N SOUTHERN
Holders Disturbed by Sharp
Decline in Securities
of Railroad.
Special Dispatch to The Star.


NEW YORK, July 1.-THE so per
cent decline In the average price OF
Southern Railway bonds from the
high point of the year may mean
much or little with respect to the i'm
mediate credit affairs of the company.
It is, however, disturbing to holders
of the securities of the road Just at
a time when two carriers in the
Northwest have been compelled TO
ceclare themselves unable to meet
their fixed charges
The Southern Railway is not in
this situation President Fairfax
Harrison has recently stated that 1t
had met its July interest and does
not face any immediate financial
difficulty" 1t has clear sailing until
October.
From the high figures made in the
early part Of this year. the Southern
Railway first consolidated S per cent
bonds declined from 103 to II, the
development and general 612s from
86 to 35, the 6S from 81 to 35 and
the As OF this same mortgage from
81 10 %. The low prices were made
at the beginning of this week. There
has subsequently been a good rally.
Offered by Institutions.
Quite heavy offerings occurred,
said to have come in part from in
stitutions that have been carrying
the bonds and were Influenced bv
the receivership announcements of
the Chicago g. Northwestern and st.
Paul, as well as by spectators who
had bought these issues a year or so
ago and were getting out while they
had a profit.
Some II years ago, what were
known as the Case -Milburn interests
bought heavily into Southern Railway
common stock. When they began
their operations, its price was below
S25 a share. They did great deal
in the way of improving the operating
methods OF the property and enlarg-
ing its facilities. BY 1925, they were
paying a dividend of per cent on
the junior shares, or the same amount
as was then being distributed TO hold
ers of the preferred stock.
The following year, the dividend
was raised to per cent, and in 1928
to 8 per cent. The stock rose in that
period above 165 on the rumor that
the rate was to be still further in
creased to 10 per cent.
1t was in this period that evidence
began to appear that some of the
insiders" were selling out. In 1882
the stock sold at 2l2. 1t Is now
around z.
In the 1929 panic, Southern Rail-
way common dropped to l09 from
1925. the high point of the previous
Summer, which was a most creditable
performance. In spite of the fact
that the railroad experienced a de-
cline of s45,ooo,ooo in its gross earn
ings from 1929 to 1881 and had a
deficit of about s6,00O,000 in the lat
ter year, it paid s4 share in divi-
dends in 1881 after SO share in 1890.
s55,OO0,000 Paid Out.
This brought the total dividends
paid on the common stock in the
1924-31 period TO about S55 1000, 600
Some of this money would be useful
to the road today.
In 1882, the Southern was one OF
the first borrowing clients of the
Reconstruction Finance Corp. from
which it obtained a three-year loan
of s7,500,000. 1t later obtained other
loans from this Government agency.
as well as from the Railroad Credit
Corp.
1t is only fair to state that the
Southern Railway, like practically
every other transportation unit in the
United States, has been injured by the
loss of business from truck and water
competition and plagued by high taxes
and increased wages. While benefit
ing, prior to 1885, from better average
business conditions in the South than
in other parts of the country. its
earnings have been affected more re-
Gently by the unpromising situation
with respect to cotton and the reve-
nue. from the cotton crop and its
collateral values in those States TO
which the system runs.
tCopyright 1895