be postponed." H. Rep. No. 2177, 77th Cong., 2d Sess., p. 6. No case has been made out for further delay here.

Finally, it is argued on behalf of some of the stockholders that the effective date of a plan promulgated under § 77 must be the date of the filing of the petition, the theory being that § 77 does not permit the accrual of interest after that date. In Consolidated Rock Products Co. v. Du Bois, we held that, under § 77B, interest on secured claims accrued to the effective date of the plan was entitled to the same priority as the principal. See 312 U. S. p. 514, note 4, p. 527, and cases cited. The definition of the terms "creditors" and "claims" was substantially the same under § 77B (b) as it is under § 77. We see no reason why the same result should not obtain here.

Treatment of the Terre Haute Bonds. The treatment accorded these bonds is attacked by the Terre Haute and representatives of its bondholders as well as by certain groups of Milwaukee bondholders. The Terre Haute interests contend, in the first place, that the plan contains no findings necessary for determining how the sacrifices required of these bondholders shall be distributed inter se. It is pointed out that the modifications proposed by the Commission for these four classes of bondholders are to be made regardless of the lien, security, interest or maturity of each and the earning power of the respective underlying properties. Hence it is argued that this phase of the plan is not fair and equitable, since it does not even attempt to preserve the respective priorities of these bond issues. The short answer to that objection is that the Terre Haute properties have not been treated by the Commission or the District Court as a part of the properties of the debtor for reorganization purposes. Nor has any question been raised or argued here as to the power of the Commission or the District Court so to treat them. The Commission and the District Court considered the

problem solely as one of rejection or affirmance of a lease. The Terre Haute bondholders were in effect given the option to take the Terre Haute lines back or to agree to a reduced rental. If the Commission had authority to determine the question of rejection in the manner indicated and if it complied with the legal requirements for the exercise of that authority, the modifications which it proposed and which the District Court approved are valid. We think they are.

In 1928 the Commission reviewed the history of the acquisition of this property. 131 I. C. C. 653-660. It then said that the Terre Haute was "a distress property controlled by a committee of Chicago bankers who wanted to liquidate and who had written the securities off the books of their banks as losses" (pp. 657-658); that “the terms upon which the property was acquired were improvident and to that extent adversely affected the financial condition of the St. Paul" (p. 657); and that "the total financial burden as of June 30, 1925, which had fallen upon the income of the St. Paul as a result of this lease was nearly $11,000,000." p. 656. In its present report the Commission, after reviewing certain earnings data, concluded that "the earning power of the Terre Haute is sufficient to cover all interest requirements, but this earning power is largely dependent on a continuation of the Milwaukee's coal traffic, together with the commercial coal traffic that accompanies it, and would be greatly diminished if such traffic ceased." And it added, "The present arrangement is distinctly to the advantage of the Terre Haute." The Commission concluded, however, that a rejection of the lease would be to the "disadvantage" of both companies and that some means should be provided "for retaining the Terre Haute lines as a part of the system without unduly jeopardizing a successful reorganization of the Milwaukee." The Commission, on the other hand, felt that an affirmance would be inequitable from

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the point of view of the Milwaukee bondholders. The present interest charges on the Terre Haute are about $1,023,000 a year. If those were assumed by the new company and fixed interest charges were kept at about $4,270,000 a year as provided in the plan, the amount of new first mortgage bonds which could be issued would have to be reduced by $10,500,000. Such a reduction, said the Commission, would mean a "substantial sacrifice" by Milwaukee bondholders which would be "entirely inequitable." In that connection, it also noted that if the $21,929,000 of Terre Haute bonds were assumed by the new company, they would constitute about 27% of the total amount of new fixed interest debt. This would mean that the allotment of fixed interest bonds to the General Mortgage bondholders "could not be more than double the amount of the existing Terre Haute bonds, whereas the mileage represented by the general mortgage is about 18 times that of the Terre Haute, and on the basis of the elements of value . . . for the lines covered by the general mortgage, about 17 times that of the Terre Haute properties." Those considerations of fairness constituted the primary reason which led the Commission to reject such an "inequitable" proposal. But there were other reasons too. The early maturities on the Terre Haute bonds, the substantial default of the debtor under its covenant in the lease to replace equipment, restrictions on the abandonment of property (all of which were covered by the proposed modifications) also played a part in the Commission's conclusion that the lease should not be assumed by the new company. The Commission said that its proposed modifications were "the best that we could devise in the public interest and as affording fair and equitable treatment to both the bondholders of the Terre Haute and those of the debtor." The District Court concurred with the Commission for substantially the same reasons. The Circuit Court of Appeals said it could not

approve that action without more specific findings. Just what findings it thought necessary we do not know. The Terre Haute interests suggest that the deficiency was in the lack of any finding that the lease was burdensome. And they add that only leases found to be burdensome may be rejected and that the evidence would not support any such finding if made.

The argument of the Terre Haute interests that only burdensome leases may be rejected is based on certain statements of ours that burdensome leases may be rejected (Palmer v. Webster & Atlas National Bank, 312 U. S. 156, 163; Philadelphia Co. v. Dipple, 312 U. S. 168, 174) and on cases like American Brake Shoe & Foundry Co. v. New York Rys. Co., 278 F. 842, 844, which hold that an equity receiver may not reject a lease when it does not appear that "in carrying out its affirmative obligations the estate suffers an actual loss as distinguished from the obtaining of a more profitable rental." And an extended analysis of the operations under the lease is made to show that the lease is a valuable asset of the estate and that the debtor received a net financial benefit from it in recent years. We do not need to determine, however, what is the scope of the authority to reject leases under § 77, either by the trustees or pursuant to a plan of reorganization. For here we think that the proposed modifications of the lease contained in the plan were wholly justified. The Terre Haute bondholders are "creditors" of the debtor as defined in § 77 (b), for they are holders of "a claim under . . . an unexpired lease." Sec. 77 (b) (5) provides not only that the plan "may" contain provisions rejecting unexpired leases but also that it "may include any other appropriate provisions not inconsistent with this section." It is also stated in subsection (b) (1) that a plan "shall include provisions modifying or altering the rights of creditors generally, or any class of them, secured or unsecured, either through

of

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the issuance of new securities of any character or otherwise." In addition, § 77 (b) (4) provides that the plan "shall provide for fixed charges" including "rent for leased railroads" in such an amount "that . . . there shall be adequate coverage of such fixed charges by the probable earnings available for the payment thereof." And § 77 (e) requires the District Court to be satisfied, before approving the plan, that it is "fair and equitable" and "does not discriminate unfairly in favor of any class of creditors." These provisions taken together mean to us that the Commission (and the District Court) have the authority in approving a plan to condition acceptance of a lease on terms which are necessary or appropriate to keep the fixed charges within proper limits or to do equity between claims which arise under the lease and the other claims against the debtor. Like the question whether a lease is burdensome (see Meck & Masten, Railroad Leases and Reorganization, 49 Yale L. Journ. 626, 649), one phase of that problem is whether the lease is worth its annual charge. A disregard in that determination of the sacrifices which other creditors are making would be wholly incompatible with the standards which § 77 has prescribed for reorganization plans. At the same time, if the Commission deems it desirable to keep the leased line in the system, it must necessarily have rather broad discretion in providing modifications of the lease where, as here, the lessor is not being reorganized along with the debtor. For under that assumption the modification must be sufficiently attractive to insure acceptance by the lessor or its creditors. Thus, the question whether a lease should be rejected and, if not, on what terms it should be assumed is one of business judgment. See Mercantile Trust Co. v. Farmers' Loan & Trust Co., 81 F. 254, 259; Park v. New York, L. E. & W. R. Co., 57 F. 799, 802. Certainly there was ample evidence warranting the conclusion of the Commission and the District Court that affirmance of the