the country needs the ships. We cannot build them without the insurance. The CHAIRMAN. Thank you, Mr. Lewis, and I appreciate your submitting this very pertinent detailed information which is in the record. Is Mr. Gordon Duke here? Mr. DUKE. Yes, Mr. Chairman. The CHAIRMAN. You represent the Big Tankers Co.? Mr. DUKE. Yes. The CHAIRMAN. I thought we were dealing with special purpose little tankers here. We would be glad to hear from you, Mr. Duke. STATEMENT OF GORDON DUKE, BIG TANKERS CO. Mr. DUKE. My name is Gordon Duke, and I am one of the group that organized a company, Big Tankers, for the purposes of making this offer. We are tanker operators and in the oil business and have had some limited experience in the ownership of vessels. Senator, I have felt for these several months that 100 percent insurance was essential to the success of the program, and a wise thing for the Government to do. A few weeks ago when we bidders received a letter from the Maritime Administration inviting applications on a 90-percent basis, we got busy with the effort to try to work without a 90-percent application if possible. Frankly, I am not able to say at this point as to whether we could or could not live with a 90-percent situation. The testimony of the shipyards and of Mr. Sanford this morning leads me to believe that any idea I might have that I might be able to manage with 90 percent is wishful thinking. I do wish to say, and it is not in deference to anybody in the room, that if it is decided by the Government in general that we want to continue the 90 percent, I am very happy to try to work that out. The little I know up until now convinces me that it is well nigh an insurmountable problem, though I cannot say for certain that it cannot be done. Secondly, I confirmed at luncheon with the president of the Ingalls Yard with which my group are not dealing, but I was curious about the matter of whether they were committed to one dealer on a basis of 90 percent, and I wanted to find it out. I learned promptly from the president of the yard himself that it was not a fact, that they had done nothing more than agreed to consider a proposal on a 90percent basis, and, in fact, would be very happy to receive such a proposal from any companies on this program, not necessarily the one company whose name was mentioned in the press. Likewise, I have talked with Newport News and Bethlehem, and they have gone to these committees and they have told their stories. In one case Newport News was apparently not of a mind to do so, but frankly, I was told by that company that if I wished to submit a formal proposal along the lines of 90 percent, they would certainly give it the utmost and serious consideration. I have not raised the point in discussions with bankers for the reason that we cannot see any grounds and basis on which I can offer 90 percent and please the bankers. I might could please the shipyards, but apparently I would have a horrible time with the bankers if Í did so. The problem here is if you gave part of this money to protect the shipyard, you take it away from the owner and the investment banker to the same extent. Senator, the basic problem is, in our judgment, one of where is the yard in the deal; that is, if they are in the mortgage side with the Government. If we pay the shipyard his 10 percent insurance of that 87% percent, we are paying doubly for that money, and the Navy is going to pay us for it, because we have to borrow the full 100 percent of the loan, we pay interest on the full loan, all of which, if the shipyard guarantees it, you pay him again. The CHAIRMAN. Do you agree with the testimony yesterday that that would add to the cost of the tankers? Mr. DUKE. Senator, there is not any question of that; the question is how much does the shipyard charge you for underwriting the 10 percent. The CHAIRMAN. I suppose it would be what type of financing that you would get for their 10 percent. Mr. DUKE. Or how much they could get out of you. Mr. DUKE. There is not any question it will put it up against the ceiling of $5, and definitely up to that, whereas we hope to save the Navy something of that $5 should we be able to proceed. I do not want to leave the impression since the Navy is in the room that there is much room for chiseling. I would say that if Admiral Denebrink pays $5 to anybody, I will be very surprised and I admit it; but there has been a lot of progress made in this matter. To be very fair about it, you remember we started out with the understanding that no insurance would be available, whereas we have at least come up to 90 percent, and I hope the result would be that the Government would decide to come on up to 100 percent; and another thing, the fact that that has not been agreed upon is that there is vast difference between the Government holding an 872-percent mortgage and insuring an 87%1⁄2-percent mortgage. I would feel that if the Government could get by on a 90-percent loan, and if the Government puts in the money, they have an active interest in it; but on the other hand, if it insures 100 percent of a bank loan, it has got a very remote, nonparticipating interest. And what is more, it does not get the interest and the banker gets it. If I were sitting in the shoes of the Administrator I would make them prove beyond any doubt that you could not do this job on 90 percent before I would move up. The CHAIRMAN. The only justification for the legislation was that we might get this thing accomplished, and we have to move up to the point-if we are not accomplishing it in one way-where we can get it accomplished, because of the great need for these tankers. Of course, if we could have done that in the other way under the 1936 act, that would have been probably the best way for it to have been done in my opinion. That is why I was frankly opposed to that, because I thought we had not exhausted the possibilities of the 1936 act, but if we are not getting it done, we have got to find ways and means to do it. Otherwise, we should not be dealing with this problem at all. We should not waste our time with it, if they are not needed. Mr. DUKE. It looks like a perfect example of democracy in action, which does not disturb any of us, I am sure, that we have got different ideas of what is the way to do it, and we are slowly distilling them. The CHAIRMAN. It just makes some people a little impatient. Mr. DUKE. That is correct, and I am one of those that is a little impatient. I confess it, but I am also very interested. There is one thing, and I would not want to leave it without saying this: it has been said here that the deal is thin, and that is true. But I also feel, in a very honest admission of owners, that there is a profit in this deal, and if there is not you will not have any bidders around here trying to worry you and get these deals, and I will be one of those missing. In spite of the fact that it is thin, and each fellow has got to shoulder his share of this burden, and that must include the shipyard, the yard is one of the beneficiaries of this deal. On the so-called equity side, with the owner, the banker shares in the success of the venture and we pay him a part of the profit instead of the banker; but I do not want to be paying the banker and the yard on the same cash. But, sir, I would not agree that the yard does not belong in here and that we should not pay him for his participation. I think most American manufacturers have a habit of selling their merchandise on a basis of participation in the success of the operation. If that is not true and legal, General Motors and General Electric and a lot of other people who have taken an interest in what their commodity will produce after it is manufactured certainly have been doing some illegal things. I think it is a question of where the yard is with relation to the bankers and the owners. May I say in closing that we hope to resolve the problem in the following fashion: that in order to please Budget, and I know this from talking to the Bureau of the Budget directly, that the bankers have some participation in this project, so as to make it a success. However, if he is 100-percent insured on anything, the first time there is any technical default-and there are always faults in this kind of a program-he wants to get out of that investment and unload the portfolio, he will rush down here and hand it to the Maritime Administration, and say, bail me out. But, if he has got a part of that deal, he is not going to be so quick to run off if there is a bauble in the situation, which is bound to develop in a situation like this, he is going to put up this 87%1⁄2 percent, and he has this 100 percent insurance of the Government, so that I have not got double interest on that 10 percent, and the same group of bankers who got this cream loan that is fully insured at a pretty good rate of interest certainly better than a Government bond and I admit this is not as liquid-but he is going to get this 12% percent and some of this equity financing, and take his place down the line in the second 10 years. There must be some equity in this thing for the owner and the yard owners if they are going to be interested, because believe me no ship (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 The applicant does not own properties at the present time. (b) The applicant does not presently own or operate any vessels. (c) Not applicable. (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 |