the effect of which was to gain further substantial delays for the presentation of a modified plan. Again, in the case of the second, now pending plan, the Missouri Pacific directors caused a printed brief to be submitted to the Interstate Commerce Commission which was in two parts. The first, and major part of it, supported the plan. The second part submitted an entirely different plan, said to be required by the alleged duty of the directors under section 77 to submit the same. It was an even greater absurdity than their first plan submitted under the circumstances set forth in the preceding paragraph. We fear that if the Missouri Pacific directors are given 18 months to institute a proceeding under section 1 of H. R. 3237, they will delay reorganization at least 18 months or longer, and then propose some hoax upon the secured creditors, meanwhile so managing the several roads involved in the Missouri Pacific system as to bring about a depressed market in those securities. A remedy for this multiple menace would be to provide that any party to a section 77 proceeding pending at the enactment of the proposed bill might institute the proceeding within 30 days after the enactment, including the debtor and any one who has duly intervened before the Interstate Commerce Commission in the section 77 proceeding prior to the enactment of the proposed bill. There is no pending section 77 case in which new plans could not be submitted within 30 days. In the Missouri Pacific case a new plan has been in readiness since last fall. By authorizing other parties, as well as the debtor, to institute proceedings, it will become certain that reorganizations will not be delayed. In this connection we point out that lines 16 to 20 of page 16 of H. R. 3237 provide for the prosecution to final determination of certain issues now pending in section 77 cases, not yet finally determined. Our appeal, above mentioned, is in that category; but it cannot be heard until September. In the meantime elaborate briefs must be prepared and printed. We cannot safely undertake this heavy expense if we cannot look for the reimbursement thereof, as now provided by section 77 (C) 12; and we could not do so if H. R. 3237 were enacted in its present form before our argument in the Circuit Court of Appeals. Moreover, it has been intimated quite recently that the Interstate Commerce Commission intends in the near future to take the vote specified in section 77 upon the pending Missouri Pacific plan. This would take months, and would involve us in heavy expense, for which we could not seek reimbursement, if H. R. 3237 in its present form were enacted before that vote was taken, canvassed and reported to the district court, because advance committments must be made. We therefore respectfully suggest the insertion at line 7 of page 16 of H. R. 3237 of a clause "except as hereinafter provided", to be followed by the insertion at line 20 of a paragraph to the effect that: "Any party or party to any such issue now pending in the United States courts may continue to prosecute the same to final determination therein, and upon the final determination thereof, or within 30 days after such final determination, may apply for a further and final allowance, to be paid out of the debtor's estate, for the actual and reasonable expenses (including reasonable attorney's fees) incurred in connection with the prosecution of any such issue to such final determination between the effective date of this act and the date of such final determination of such issue, and limited thereto, as if paragraph (12) of subsection (C) of said section 77 were to that extent continued in full force and effect.' We take it that it would not be necessary to repeat the first part of this proviso at page 18, with respect to lines 5 to 11, which we think would be subject thereto. We respectfully suggest the insertion at the end of paragraph (2) of section 2, at page 14, line 22, of the following: And provided further, That, subject to the immediately foregoing proviso, that any parties in interest, including committees and other representatives of creditors and stockholders, who are intervenors in any section 77 proceeding pending on the date of enactment of this act before the Interstate Commerce Commission or United States courts, may institute proceedings and file applications within 30 days after the effective date of this act under section 1 of this act, and conduct the same to final determination as therein provided, upon such notice to the carrier affected thereby as the Commission shall prescribe; and upon the final determination thereof, within such maximum limits as are fixed by the Commission, the United States court having custody of the properties of such carrier, may make an allowance, to be paid by such carrier, for the actual and reasonable expenses (including reasonable attorney's fees) incurred in connection with such proceedings by any such parties, including committees and other representatives of creditors and stockholders." The foregoing would involve striking out the word "carrier" from line 15 on page 5. Most respectfully yours, INTERNATIONAL-GREAT NORthern Railroad Co., Hon. CLYDE M. REED, United States Senate, Washington, D. C. DEAR SIR: Acknowledging your favor of May 20, I beg leave to answer the inquiries therein contained as follows: This committee represents about $3,500,000 face amount of first-mortgage bonds of International-Great Northern Railroad Co., series A, series B, and series C. About $500,000 face value of said amount is held by institutions, and about $3,000,000 by individuals, scattered throughout the country. Among the holders which we represent, in addition to banks and insurance companies, are colleges, benevolent associations, cemetery associations, and similar institutions. Most respectfully yours, Hon. CLYDE M. REED, LEON D. STERLING, Secretary. THOMPSON, MITCHELL, THOMPSON & YOUNG, Washington, D. C. DEAR SENATOR REED: Pursuant to your request in yours of the 20th instant, I hand you herewith enclosed a statement showing in detail the funded debt I have paid or purchased during the years 1940 to 1946, inclusive. This statement sets forth the securities acquired, their par value, the date retired or purchased, and the amount paid therefor. You will notice that the aggregate par value of the funded debt paid or purchased is $94,691,378.50. In addition, I acquired in January of this year, on invitations for tenders, $895,000 in principal amount of Missouri Pacific secured serial 5-percent bonds, paying therefor $875,850. Yours very truly, GUY A. THOMPSON, Trustee, Missouri Pacific Lines. Missouri Pacific R. R. Co., funded debt paid or purchased, years 1940 to 1946, inclusive second mortgage. St. L. I. M. & S. River and Gulf Divisions first mortgage. Plaza Olive Bldg., first mortgage (sink. ing fund operations). 24, 183, 600.00 25,000.00 November 1945.. June 1940.. May 1943. 15, 102. 45 May 1944 22, 404.38 Missouri Pacific R. R. Co., funded debt paid or purchased, years 1940 to 1946, inclusive-Continued Office of chief accounting and financial officer, St. Louis, Mo., May 27, 1947. 94, 689, 412. 77 NEW ORLEANS, TEXAS & MEXICO RAILWAY CO., Hon. CLYDE M. REED, Senate Office Building, Washington, D. C. DEAR SENATOR REED: I have your circular letter addressed to persons interested in the reorganization of certain railroads, including the New Orleans, Texas & Mexico Railway Co. I am acting chairman of the committee representing the first-mortgage bonds of New Orleans, Texas & Mexico Railway Co. Our committee is opposed to the plan of reorganization of Missouri Pacific Railroad Co. (including New Orleans, Texas & Mexico Railway Co.) now pending before the Circuit Court of Appeals for the Eighth Circuit on appeal from the order of the district court approving the plan. We oppose the plan because, in our opinion, it does not provide adequately for the New Orleans, Texas & Mexico first-mortgage bonds in view of improvements in the situation since the plan was approved by the Interstate Commerce Commission in 1944. It is our understanding that most of the other interests affected by the plan are also now opposed to it. Counsel for our committee recently appeared before the circuit court of appeals on a motion to refer the plan back to the district court in order that it might be referred back by the district court to the Interstate Commerce Commission. That motion was denied on the ground that creditors should be given an opportunity to vote on the plan before further action. It is our hope that a vote will soon be taken and our committee will advise bondholders to vote against the plan. We believe that the court will refuse to confirm the plan if most classes of affected securities vote against it and that, in that event, a fairer plan will be approved by the Interstate Commerce Commission. În spite of our objection to the pending plan, we do not believe that the problem of reorganization of the relatively few railroads remaining in proceedings under section 77 can be met by legislation along the lines of H. R. 3237. We are in favor of the provisions of section 1, permitting Voluntary recapitalization of railroadnot in bankruptcy. Section 2, however, dealing with railroads in bankruptcy, seems to us seriously defective because it does not permit any modification of outstanding stock or of outstanding debt not represented by bonds, notes, or other evidences of indebtedness. That provision might not make impossible a separate reorganization of New Orleans, Texas & Mexico Railway Co., since, in our opinion, that company can be reorganized without disturbing the outstanding stock; but it would make impossible any reorganization of the Missouri Pacific because it is impossible to give fair treatment to Missouri Pacific creditors which the stock is left entirely undisturbed, without creating a heavily watered capital structure. We do not understand why Congress should believe it to be in the public interest to leave stock undisturbed at the expense of creditors or at the expense of overcapitalization. It may well be that some of the reorganization plans heretofore consummated have been unduly harsh in their treatment of stock but that is no reason for a complete reversal of the relative rights of creditors and stockholders, which is what the proposed bill seems to contemplate. We also object strongly to the provision of the bill which would permit a readjustment of interest rates on outstanding bonds for the period between the institution of the bankruptcy proceedings and the completion of a reorganization. We are advised by our counsel that such a provision would be unconstitutional, particularly if it were applied to the New Orleans, Texas & Mexico first-mortgage bonds, interest on which at the contract rates has been fully earned, with a substantial margin, during the period of bankruptcy. The provisions of the proposed bill relating to the election of directors are also entirely inappropriate for the situation of the New Orleans, Texas & Mexico and its subsidiaries. Substantially all the stock of the New Orleans, Texas & Mexico is owned by the Missouri Pacific and pledged to secure its 54 percent secured serial notes. All of the stock of the subsidiaries of the New Orleans, Texas & Mexico is owned by the New Orleans, Texas & Mexico and pledged to secure its firstmortgage bonds. It would, therefore, be impossible to find directors of the New Orleans, Texas & Mexico subsidiaries who have been stockholders for more than 7 years and it would almost certainly be impossible to find directors of the New Orleans, Texas & Mexico who have been stockholders for 7 years, particularly in view of the requirement that directors must live within 100 miles of the railroad. I do not know what use, if any, you intend to make of replies to your circular letter. If this reply is to be used or referred to in any hearing on the proposed legislation, I respectfully request that the entire letter be placed in the record so that there may be no misunderstanding as to my position. In summary I might say that in my opinion expeditious completion of pending railroad reorganizations will be better attained under existing law than under any legislation of the character of that now proposed. If Congress is of the view that pending plans of reorganization are or may be unduly harsh to stockholders, that problem could be simply and expeditiously settled by a brief statute directing that all pending reorganization plans be reconsidered by the Interstate Commerce Commission in the light of developments since their approval by the Commission before being finally consummated. Our committee, at a meeting held today, approved this letter. I am sending a copy of this letter to Senator White, as chairman of the Committee on Interstate and Foreign Commerce, and also to Senator Hawkes, whom I know. Yours faithfully, G. H. WALKER, Acting Chairman RAILROAD SECURITY OWNERS ASSOCIATION, INC., CLERK, SENATE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, (Attention Mr. Cooper.) DEAR SIR: The concluding day for the hearings before the subcommittee on the proposed amendments to S. 249 was taken up by testimony of those who support the amendments. During the course of their testimony it seemed to me that certain erroneous statements were made as to the practical operation of the proposed amendments. In the enclosed memorandum I have attempted to summarize, as dispassionately as possible for a partisan to do, the practical effect of these proposals. I would appreciate it if this supplemental statement is incorporated as a part of the record. Yours very truly, FRED N. OLIVER. PROPOSED LEGISLATION DEALING WITH PENDING RAILROAD REORGANIZATION CASES (Amendments proposed by Senators Reed and Myers to S. 249; proposed sec. 20c of H. R. 3237) The securities of defaulted rails owned by institutional holders were acquired as an investment many years before bankruptcy. These institutions are interested solely in protecting the interests of their depositors and policyholders. But every person who rides or ships by railroad is vitally concerned with the facts here set forth. |