And here is the pertinent part of it: Since no bank or insurance company approached by us will agree to lend without the aforesaid Government insurance of loans and mortgages covering seveneighths of the cost of the vessel, permissible under the very terms of Public Law 781, our program will fail unless such insurance is forthcoming from the Secretary of Commerce acting through the Maritime Administrator. Is that about the general story? Mr. LEWIS. That is correct, but that will be supported in specific detail by Eastman-Dillon. A great many of the institutions are forbidden by law to touch them unless it is insured all the way through. The CHAIRMAN. With your permission, I would like to place in the record a letter from the Eastman-Dillon Co. to the Maritime Administrator dated March 14, in which they set out in detail this matter and also the summary information which also sets out in detail the facts and figures as here regarding this matter. (The above-mentioned documents are as follows:) Hon. WARREN G. MAGNUSON, United States Senate, Washington, D. C. OLEUM TRANSPORT CORP., DEAR SENATOR MAGNUSON: Knowing of your interest in the proposed building in American shipyards of fifteen 25,500 deadweight ton high-speed tankers for ten year charter to the Military Sea Transport Service under the provisions of Public Law 575, 83d Congress, 2d session, we are sending you herewith a copy of our application submitted March 16, 1955, to the Maritime Administration requesting Government insurance of 100 percent of loans and mortgages covering 871⁄2 percent of the cost of construction of three of the subject tankers. Last November we submitted a bid to MSTS covering three such tankers and our bid and the time for action by MSTS have both been extended to April 1, 1955. An examination of our application will reveal that our plans for constructing, financing and operating the 3 tankers represent a 100 percent American program and follow the aforesaid enabling legislation in all particulars. Every director and stockholder of our company is an American citizen. We plan to construct the vessels in American shipyards and operate them under the American flag. Our bankers are Messrs. Eastman, Dillon & Co. of 15 Broad Street, New York 5, N. Y., and the lending institutions which they have interested in financing our program, and the programs covering an additional six tankers of other bidders represented by Eastman, Dillon & Co., include the following: The National City Bank of New York, New York, N. Y.; Chemical Corn Exchange Bank, New York, N. Y.; the Northwestern Mutual Life Insurance Co., Milwaukee, Wis.; the Mutual Benefit Life Insurance Co., Newark, N. J.; Connecticut General Life Insurance Co., Hartford, Conn.; and other life insurance companies throughout the country. Through the investments of the aforesaid institutions, thousands upon thousands of policyholders throughout the United States will become investors in American-flag shipping. Our bid to MSTS covering three of the subject tankers, an I the time for Government action on all bids, has been extended to April 1, which is also the expiration date of the firm offer without escalation for the building of the tankers by Bethelhem Steel Co., and other shipyards. Since no bank or insurance company approached by us will agree to lend without the aforesaid Government insurance of loans and mortgages covering seven-eights of the cost of the vessel, permissible under the very terms of Public Law No. 781, our program will fail unless such insurance is forthcoming from the Secretary of Commerce acting through the Maritime Administrator. We would welcome any assistance you are in a position to give to further this program. Very truly yours, J. WHITNEY LEWIS, President. DEPARTMENT OF COMMERCE, MARITIME ADMINISTRATION, Washington, D. C., March 25, 1955. Subject: Application for title XI aid in construction of tankers for MSTS charter. THE ATLANTIC LINES Co., INC., c/o Robert D. Weisberg, New York, N. Y. GENTLEMEN: *** You are advised that further consideration will be given to your application provided the following conditions can be met: 1. The application shall not request more than 90 percent insurance coverage of 872 percent of the construction cost of each tanker to be chartered to the MSTS. The balance of 121⁄2 percent of the construction cost must be furnished in equity capital by the prospective owner. 2. The applicant must have a minimum net working capital of $475,000 per ship at the time of the beginning of the mortgage insurance agreement to cover necessary expenses to the applicant during the construction period and operating expenses prior to receipt of first charter hire. 3. The initial net worth of the applicant shall not be less than $1 million paid-in capital per ship, of which not less than $500,000 must be contributed by the holders of common stock. In addition, during the period the mortgage insurance is in force, the owners will be required to refrain from doing certain acts, as set forth in general order 60, if such acts would result in reducing net worth below 121⁄2 percent of the depreciated cost of the vessel or 121⁄2 percent of the mortgage indebtedness, whichever is greater, or reducing the common stock interest below the lower of $500,000 or the mortgage indebtedness. General order 60 specifies in part that the purchaser shall agree that (i) no capital shall be withdrawn, (ii) no share capital shall be converted into debt, (iii) no dividend shall be paid, (iv) no salary at a rate in excess of $25,000 per annum shall be paid, if, after such withdrawal, conversion, or payment, the amount of net worth thereby would be reduced below the minimum prescribed. 4. In the event more than one tanker is proposed, and the construction periods are so scheduled as to provide for one tanker to be in operation before delivery of the next, consideration will be given to modifying the above requirements on a multiple-ship basis, depending, however, on the particulars of the specific case. If you are able to meet the foregoing requirements your application will be given prompt and expeditious attention, it being understood, however, that upon further review of the subject application it may be necessary to request additional information with respect to other phases of the application. APPLICATION FOR SHIP MORTGAGE AND LOAN INSURANCE UNDER TITLE XI, MERCHANT MARINE ACT 1936, AS AMENDED SUMMARY INFORMATION Name of applicant: Oleum Transport Corp., Suite 7606, Empire State Building, 350 Fifth Avenue, New York 1, N. Y. Name of proposed mortgagee and lender: 1. Mortgagee: Negotiations are in progress with the Northwestern Mutual Life Insurance Co., 720 East Wisconsin Avenue, Milwaukee, Wis. 2. Lender: Negotiations are in progress with National City Bank of New York, 55 Wall Street, New York, N. Y. Nature of application: Mortgage insurance and loan insurance. The proposed loan: (a) Types of loan (state whether mortgage or other type of loan) The loan is divided into three parts: 1. A loan of $3,180,000 ($1,060,000 per vessel) during construction from the insurance company (which will be a second lien obligation unsecured by Government insurance), this money to be advanced ahead of any bank money; 2. An interim loan of $21,540,000 ($7,180,000 per vessel) for progress payments for the construction in an American shipyard of three tankers of 25,500 deadweight tons, the total cost of which will be approximately $24,720,000 or $8,240,000 per vessel; and 3. A mortgage loan to refinance the interim loan, of which the insurance company will provide $14,001,000 and the bank will provide $7,539,000 or a total of $21,540,000 ($7,180,000 per vessel), secured by first preferred mortgage on the vessel. (b) Purpose (state briefly purpose with reference to sec. 1104 (a) (8), 1104 (b) (2) and/or 1106 of the act) The purpose of the proposed loans and mortgage are to aid in financing the construction (including designing, inspecting, outfitting and equipping), subsequent to September 3, 1954, of vessels owned by citizens of the United States which are designed principally for commercial use in coastwise, intercoastal, and foreign trade. (c) Amounts of loans Interim loan $21,540,000 or $7,180,000 per vessel. An additional loan of $3,180,000 ($1,060,000 per vessel) will be a second lien obligation unsecured by Government insurance. (d) Periods of loans (approximate dates of execution and of final maturity) The interim loan will probably be executed about April 1, 1955, and will mature upon the delivery of the ships approximately 24 months later. The mortgage loans will be executed upon delivery of the ships approximately April 1, 1957, and will mature 20 years thereafter, or approximately April 1, 1977. The unsecured portion of the loan will be executed approximately April 1, 1955, and will mature 5 years after the dates of delivery of the vessels or approximately April 1, 1962. (e) Interest rates On the interim bank loan, 34 percent; for the mortgage loan, 4 percent for the bank portion, and 41⁄2 percent for the insurance company portion; and for the second lien obligation, 5 percent. The figures include premium on mortgage insurance where applicable at the rate of 1⁄2 percent. (f) Amortization schedules 1. Uninsured loan.-This loan, as is stated above, will be in the amount of $3,180,000 ($1,060,000 per vessel) and will be advanced ahead of any bank money, will be amortized at the rate of $212,000 per year, beginning 1 year after the start of operations. 2. Interim bank loan.-This loan, to be advanced in the form of progress payments, after the uninsured loan has been completely taken down, in accordance with the construction contract, will be refunded in full by the mortgage loan to be made upon delivery of the ships. 3. Mortgage loan. This loan will be amortized at the rate of $359,000 per year for 20 years. The first seven amortization payments will be made to the bank to retire its loan. The remaining 13 payments will be made to the insurance company. (g) Type of vessels Tankers of 25,500 deadweight tons, having a speed of not less than 18 knots at the full loan draft with 80 percent of designed normal horsepower. These vessels are claimed to be special purpose vessels. APPLICATION The undersigned, Oleum Transport Corp. (herein referred to as the "applicant"), hereby applies to the Maritime Administrator (herein referred to as the "Administrator"), under title XI of the Merchant Marine Act, 1936, as amended (herein referred to as the "act"), and the regulations prescribed by the Administrator thereunder (herein referred to as the "regulations"), for insurance of: (a) The interest on and 100 percent of the unpaid balance of the principal of an interim loan in the original principal amount of $21,540,000 to be made to the undersigned by National City Bank of New York, as lender, and (b) The interest on and 100 percent of the unpaid balance of the principal of 3 mortgages in the aggregate principal amount of $21,540,000 or $7,180,000 on each of 3 tankers, to be executed by the undersigned, in favor of a corporate trustee, as mortgagee, for the benefit of the National City Bank of New York and the Northwestern Mutual Life Insurance Co., of Milwaukee, Wis., for the purposes and upon the terms and conditions herein set forth, including the annexed schedule I, and subject to all the provisions of the act and the regulations. In support of this application the undersigned submits the following information: (a) Not applicable. (b) Not applicable. I. As to the applicant: Its identity (c) Incorporated companies: 1. Exact name of applicant: Oleum Transport Corp. 2. Form or type of organization: Corporation. 3. Laws under which organized: State of Delaware. 4. Address of principal executive offices, and of important branch offices, if any: Principal executive office, Suite 7606, Empire State Building, 350 Fifth Avenue, New York 1, N. Y. No branch offices. 5. The following information with respect to each officer and director of the corporation: 6. There are no stockholders other than those indicated under the preceding item. 7. There is no voting agreement, voting trust or any other arrangement whereby the voting rights in any shares of the applicant are owned, controlled or exercised in any way by any person not the holder of legal title to such shares. II. As to the applicant: Its business and affiliations (a) Applicant was organized as a Delware corporation on March 8, 1954. There is no predecessor company or business. The present stockholders acquired the corporation by purchase of the right to subscribe to its capital stock on or about November 23, 1954. The business of the applicant since its organization has been that of owning (by construction and/or purchase) and chartering tanker vessels in foreign and coastwise trade. The transaction of which this application forms a part, however, is the first business in which it has actually engaged. (b) Neither the applicant nor any predecessor or affiliate has been in bankruptcy, insolvency or reorganization proceedings. (c) Applicant has no subsidiaries and no parent company at the present time. It is contemplated that upon completion of the financing arrangements now under negotiation, 50 percent of applicant's stock will be owned by the Northwestern Mutual Life Insurance Co. of Milwaukee, Wis., which is engaged in the business of life insurance and investment, or by such other lending institution or investor as may furnish the uninsured one-eighth of capital required; that 10 percent of applicant's capital stock will be owned by Eastman, Dillon & Co., or the partners thereof, of 15 Broad Street, New York 5, N. Y., investment bankers; and that the balance of capital stock will be owned by the present stockholders in equal amounts. III. As to the management of the applicant (a) A brief description of the principal business activities during the past 5 years of each director and each principal executive officer of the applicant: 1. J. Whitney Lewis, president, treasurer and director. Independent petroleum consultant with offices at 480 Park Avenue, New York City, from about March 1947 to about July 31, 1951; mining law consultant to the Government of Indonesia at Djakarta (contract entered into under the auspices of Economic Cooperation Administration through the J. G. White Engineering Corp., 80 Broad Street, New York), August 1951 through March 1953; independent petroleum consultant working in Los Angeles, Mexico City and New York-March 1953 to date. Vice president and subsequently president of Oleum Transport Corp., March 1954 to date. 2. Alexis J. Anderson, vice president and director. President, A. J. Anderson, Inc., 120 Broadway, New York City. Shipbrokers (sales, chartering, conversion and operation) since 1948, working exclusively with American-flag shipping. From 1952 until January 1955 he was a director and stockholder of International Navigation Corp., 52 Broadway, New York City, who were owners of American-flag ships. Mr. Anderson severed his connection with this company in January 1955. 3. Julius Manzie, director. Retired officer of Sperry Gyroscope Corp.; for the past 12 years has been secretary of the Propeller Club, New York City; marine architectural consultant, John H. Wells, Inc., 515 Madison Avenue, New York City. 4. Louis J. Robbins, assistant secretary and director. Attorney-at-law, suite 7606, Empire State Building, 350 Fifth Avenue, New York, N. Y., throughout the past 5 years. (b) Both Mr. Lewis and Mr. Anderson are members of the Propeller Club of New York and of its legislative committee. Mr. Julius Manzie is a stockholder of Sperry Gyroscope Co., division of the Sperry Corp., Great Neck, Long Island, and a former officer of that company, now retired. He is the secretary of the Propeller Club of New York, 17 Battery Place, New York City. (c) There are no affiliations or relationships whatever between the applicant and the contractor referred to in item V, (d) hereof or between the directors and principal executive officers of either company. IV. As to the applicant: Its property and activities (a) The applicant does not own properties at the present time. (d) Not applicable. V. The project (a) The proceeds of the proposed loan will be expended for the construction (including designing, inspecting, outfitting and equipping), and for legal, overhead, financing and other costs incidental thereto, subsequent to September 3, 1954, of three tankers owned by citizens of the United States which are designed principally for commercial use in the coastwise, intercoastal, and foreign trade. (b) Not applicable. (c) 1. The estimated cost of construction of each vessel is $8,240,000, or a total of $24,720,000. The difference ($3,180,000, or $1,060,000 per vessel) between the cost of construction and the amount of the proposed loan, which is $21,540,000, or $7,180,000 per vessel, is being obtained through arrangements with lending institutions and investors made by Eastman, Dillon & Co., 15 Broad Street, New York City. These arrangements are completely outside the insurance for which application is made herein. 2. The general characteristics of the proposed new vessels are those set forth in Public Law 575, 83d Congress, 2d session, approved August 10, 1954; that is, it will be of approximately 25,500 deadweight tons and shall have a speed of not less than 18 knots. Its other characteristics shall be those set forth in the invitation to bid dated August 20, 1954 (ser. 1913M34), issued by Vice Adm. F. G. Denebrink, Commander, Military Sea Transportation Service, pursuant to Public Law 575. Applicant claims that these vessels are special-purpose vessels (a) for the reasons set forth in the letter dated March 10, 1954, addressed to the chairman of the Senate Committee on Armed Services by Hon. Sinclair Weeks, Secretary of Commerce, and in the letter dated March 1, 1954, addressed to the chairman of the Senate Committee on Armed Services by Rear Adm. Harry H. Nunn, Judge Advocate General of the Navy for the Secretary of the Navy, both of which letters are printed in the report of the Senate Committee on Armed Services, Senate Report 1337, 83d Congress, 2d session, to accompany S. 3458; (b) for the further considerations set forth in said report; and (c) upon the authority of the letter (A-2) addressed on January 4, 1955, by D. P. Brown, senior vice president and technical manager of the American Bureau of Shipping, 45 Broad Street, New |