Evening star., 1946-09-04
New Plan Filed
For Liquidation
Of Wreco Stock
Program Amended
To Meet Objections
Raised by SEC

NulSe0 Dy SEN
A new and substantially amended
plan for liquidation of the WASH
ington Railway Electric Co., a hold
ing company, has been submitted
to the Securities and Exchange
Commission and the Public Utilities
Commission of the District, It was
learned today.
The amended plan is designed
to meet objections raised by the
SEC last June to the original plan
OF liquidation submitted by the
company in June, 1914.
Elimination of WRECO as a hold
ing company is directed under the
death sentence" clause of the
Public Utility Holding Company Act
OF 1885. A subsidiary of the North
American Company, which also is
holding company, the WRECO
system consists of itself, one holding
company subsidiary, two public
utility subsidiaries and four nom
utility subsidiaries.
WRECO has 100 per cent voting
control Of the Potomac Electric
Power Co. and so per cent voting
control OF Capital Transit Co.
Simplification Explained.
The new plan for so-called "sim-
plification of its holding company
system was explained to stockhold-
ers In letter sent out yesterday by
Alfred G. Neal, WRECO president.
With the letter went an official text
of the entire plan and copy of the
SEC opinion of last February which
objected to some provisions of the
original plan.
Mr.. Neal told The Star today he
hoped the SEC would approve the
amended plan. 1t was submitted to
SEC last Friday, and to the Public
Utilities Commission of the District
late yesterday. Before it could be
effectuated, it must be approved by
SEC, the local PUG and, in some re-
spects. by District Court.
Although Mr.. Neal indicated he
was hopeful of approval by the regu-
latory bodies, reaction among some
large holders of Washington Rail-
way g. Electric preferred per cent
"non-calable" stock early today was
to the contrary. One we'll informed
source declared the preferred stock
holders would consider the amended
plan more unfair" than the original
The way was cleared for dissolu-
ton OF both North American and
WRECO April l. when the Supreme
Court upheld the death sentence
clause limiting interstate gas and
electric holding companies to q
single integrated utility service.
In addition, on June 18. President
Truman signed a special act ito IA
cilitate the liquidation of WRECO." Z"
Legislative authority became neces-
sary when the WRECO dissolution
plan proposed the issuance of stock
dividents which is a forbidden prac-
tice in the District under legisla ton
of 1918.
Must Sell 80 Per Cent of Stock.
Under the North American dis
solution plan before the SEC, the
holding company is to divest itself
of the 80 per cent of the capital stock
of WRECO, constituting IS per cent
of the voting stock, which it holds.
Stripping itself of other holdings.
North American is to confine it's
operations to a Missouri Illinois
company.
The plan to break up WRECO
contemplates the separation of the
transit and electric power holdings,
leaving PEPCO owner of the Brad
dock Light & Power Co. of Virginia,
which supplies power to the Penta-
gon and a few private consumers.
1t is ultimately planned that full
ownership of the transit company
will be vested in the general public
AS explained by Mr.. Neal in his
letter the amended plan changes
the original with respect to the tive
provisions to which the (SEC) COM
mission indicated objections.
SEC Ruling Cited.
In its interim opinion" explained
Mr.. Neal, "the SEC noted that a 5
per cent dividend rate on the Pepcc
preferred stock to be issued to pre-
ferred stockholders of the Wrece
was high under prevailing market
conditions, and suggested the avail.
ability OF other means of providing
fair compensation to the preferred
stockholders for the rights sur
rendered by them.
The amended plan" he said
provides that there will be issued
to the holders of the $4,000 out.
standing shares Of per cent pre-.
ferred stock of the par value of sl0(
per share of the Wreco In lieu ol
their holdings, for each share OF
such stock: (a) One share of $3.50
per cent preferred stock of Pepco
having par value of $50 per share
and entitled to receive cumulative
dividends at the annual rate of 3.6C
per cent: CD three and one-hali
shares Of common stock of Pepcc
having par value OF $40 per share
and (c) accured dividends upon the
) per cent preferred stock oi
Wreco to the date upon which the
amended plan is declared effective
less the amount of the dividend.
accruing on the $50 per cent pre-.
ferred stock prior to that date"
Under the original plan as filed
Mr.. Neal explained, Wreco pro.
posed to retire its common stock BY
giving the holders opportunity TT
withdraw 40 shares of the new S1t
par calue common stock of Pepc,
and 1.846 shares of capital stock O
Capital Transit Co. upon the sur.
render Of one share of the Wrec,
common stock, and the payment O.
$50 In cash or said sum as adjusted
as specified in the plan"
Would Sell Holdings.
The SEC In It's opinion. Mr.. Nea
told the stockholders, expressed
doubt as to the necessity Of requirin,
Q payment by Wreco's common
stockholders In order to provide tn,
cash necessary to consummate tn,
x1I