In re Florida East Coast Ry. Co., 4827.
| Decision Date | 11 March 1952 |
| Docket Number | No. 4827.,4827. |
| Citation | 103 F. Supp. 825 |
| Parties | In re FLORIDA EAST COAST RY. CO. |
| Court | U.S. District Court — Southern District of Florida |
COPYRIGHT MATERIAL OMITTED
Davis, Polk, Wardwell, Sunderland & Kiendl and Edgar G. Crossmen, of New York City, and Stockton, Ulmer & Murchison, of Jacksonville, Fla., for first and refunding mortgage bondholders' committee.
Jackson, Nash, Brophy, Barringer & Brooks and Paul B. Barringer, Jr., of New York City, and Osborne, Copp & Markham and H. P. Osborne, of Jacksonville, Fla., for first mortgage trustees.
Appleton, Rice & Perrin, Clifton S. Thomson, Robert M. McCulloch and G. R. Gerhard, of New York City, and Bedell & Bedell, of Jacksonville, Fla., for first and refunding mortgage trustees.
Giles J. Patterson, of Jacksonville, Fla., and John R. Turney and Robert N. Lowry, of Washington, D. C., for St. Joe Paper Co.
Henry P. Adair and Clarence G. Ashby, of Jacksonville, Fla., and Donald Russell, of Spartanburg, S. C., for testamentary trustees of the Alfred I. duPont estate.
Oliver & Donnally and Willard P. Scott, of New York City, and J. Turner Butler, of Jacksonville, Fla., for S. A. Lynch and associated interests.
Miller Walton, of Miami, Fla. (Walton, Hubbard, Schroeder, Lantaff & Atkins, of Miami, Fla., of counsel), for W. G. Welbon and others.
Macfarlane, Ferguson, Allison & Kelly and George W. Ericksen, of Tampa, Fla., for F. K. Conn and others.
Clarence M. Mulholland, Toledo, Ohio, and Edward J. Hickey, Jr., of Washington, D. C., and Edwin C. Coffee, of Jacksonville, Fla., for Railway Labor Executives' Ass'n.
Smathers, Thompson, Maxwell & Dyer, of Miami, Fla., for W. R. Huggins and others.
Alexander & Green, Edward W. Bourne, Andrew Oliver, William A. Boylan, of New York City, Charles Cook Howell and Richard B. Gwathmey, of Wilmington, N. C., and Howell & Howell, of Jacksonville, Fla., for Atlantic Coast Line R. Co.
Henry L. Walker, Charles Clark and Sidney S. Alderman, of Washington D. C., and Cyril C. Copp, of Jacksonville, Fla., for Southern Railway System and affiliated lines.
Harold J. Gallagher and Walter H. Brown, Jr., of New York City, James B. McDonough, Jr., of Norfolk, Va., and Guy W. Botts, of Jacksonville, Fla., for Seaboard Air Line R. Co.
Jerome C. Hofmayer, of Miami, Fla., for Greater Miami Traffic Ass'n and Miami Chamber of Commerce.
Lewis W. Petteway and D. Fred McMullen, of Tallahassee, Fla., for Florida Railroad and Public Utilities Commission.
John B. L'Engle, of Jacksonville, Fla., for debtor.
Russell L. Frink, of Jacksonville, Fla., for debtor's trustees.
Florida East Coast Railway Company operated under an equity receivership in this Court from August 31, 1931, until January 25, 1941, when a reorganization proceeding was instituted under Section 77 of the Bankruptcy Act, 11 U.S.C.A. § 205, as amended.
Four plans of reorganization have been proposed by the Interstate Commerce Commission. The first and third were rejected by this Court. The second was in effect withdrawn by the Commission. The matter is now before the Court for consideration of the fourth amended plan, approved by the Commission on July 12, 1951, certified to the Court on October 25, 1951, and taken up by this Court for consideration on February 4, 1952.
As of January 25, 1941, when the petition for reorganization was filed, the debtor railway's capitalization, plus receivers' obligations, was:
Capital stock ............... $37,500,000.00
First Mortgage 4½% bonds
due January 1, 1959 ....... $12,000,000.00
First and Refunding Mortgage
5% bonds, due September
1, 1974 ................... $45,000,000.00
Equipment Trust Certificates
Series "H" 4½% ............ $ 180,000.00
______________
$94,680,000.00
Receivers' Equipment Trust
Certificates, Series "I" 3% $ 1,116,000.00
______________
Total .............. $95,796,000.00
Since January 25, 1941, the reorganization trustees have purchased and now own $3,811,000 of the $12,000,000 First Mortgage 4½% bonds, leaving actually outstanding of that issue $8,189,000. They have also retired Equipment Trust Certificates, Series "H," "I," and "J." Additional Equipment Trust Certificates, Series "K," have been issued, however, and three new Conditional Sales Agreements for the purchase of equipment have been executed, so that as of December 31, 1950, the capitalization and secured obligations of the debtor were:
Capital Stock ............... $37,500,000.00
First Mortgage 4½% bonds
due January 1, 1959
(originally $12,000,000.00) $ 8,189,000.00
First and Refunding Mortgage
5% bonds
due September 1, 1974 ..... $45,000,000.00
Equipment Trust Certificates
Series "K"
(originally $2,060,000.00) $ 1,648,000.00
Conditional Sales Agreement,
dated March 15,
1945
(originally $2,622,531.00) $ 886,269.27
Conditional Sales Agreement,
dated March 15,
1946
(originally $1,692,637.77) $ 444,533.00
Conditional Sales Agreement,
dated July 15, 1947
(originally $3,842,182.00) $ 2,214,440.00
______________
Total .............. $95,882,242.27
All sums, principal and interest, due on the 4½% First Mortgage, as well as on all equipment obligations, have been paid in full when due. The debtor's financial difficulties stem primarily from the requirements of its 5% First and Refunding bonds, which have been in default since September 1, 1931. As of September 1, 1951, defaulted interest thereon aggregated $37,125,000, seven coupons,2 aggregating $7,875,000, having been paid from time to time.
These bonds were issued in 1925, primarily to pay for double tracking the railway from Jacksonville to Miami in an effort to meet the extraordinary transportation requirements of the Florida "boom" of the middle 1920's, during which freight piled up in Jacksonville until the railroad storage tracks overflowed and an embargo upon further shipments became necessary. When the "boom" collapsed, the debtor railway — along with many other businesses — soon found that it had greatly overexpanded and could not meet its fixed charges. This produced the 1931 equity receivership. The nationwide economic "depression" of 1929-1937 also greatly reduced the debtor's earnings.
The first plan of reorganization, certified to the Court by the Interstate Commerce Commission on August 10, 1942 (252 I.C.C. 423, 731) was a simple, normal plan of internal reorganization which held the existing capital stock and unsecured indebtedness to be without value, and recognized the 5% bondholders as the equitable owners of the property, subject to the first mortgage and equipment obligations. The property was valued at $37,000,000, to be capitalized as follows:
Equipment Notes .............. $ 1,992,000.00
First Mortgage Series "A"
bonds, to be issued to
holders of existing 4½%
First Mortgage bonds ....... $12,000,000.00
General Mortgage Series
"A" bonds, to be issued to
holders of existing 5%
First and Refunding
bonds ...................... $ 4,500,000.00
Common Stock (no par)
450,000 shares, to be issued
to holders of existing
5% First and Refunding
bonds ...................... $18,508,000.00
______________
Total Capitalization ..... $37,000,000.00,
to which could be added, if necessary, not exceeding $6,000,000 in additional first mortgage bonds for capital expenditures. Maximum permissible capitalization under the first plan was therefore $43,000,000.
This plan provided that the First Mortgage 4½% bondholders would receive new First Mortgage bonds equal in amount and seniority to their former holdings, while the First and Refunding 5% bondholders would receive, for each $1,000 bond $100 of new General Mortgage bonds (junior to the First Mortgage bonds) and 10 shares of no par value stock. Existing interests in the property would thus be equitably preserved in the then owners by a ratable distribution to them of the new securities, the face value of their interest being scaled down to conform to the then actual value of their equity in the property.
This plan was rejected by the Court, October 19, 1943, not because of any objection inherent in the plan itself, but because a sum of approximately $17,000,000 in cash or its equivalent had accumulated in the hands of the reorganization trustees while the Commission had the matter under consideration from January 25, 1941, to August 10, 1942. This sum was unallocated by the plan. Being of the opinion that this sum should not be left as a floating surplus, but should be specifically allocated, the Court rejected this plan for that reason alone and returned the matter to the Commission for further consideration, anticipating that substantially the same plan would be resubmitted with these funds appropriately allocated. In re Florida East Coast Ry. Co., D.C., 52 F.Supp. 420.
On November 8, 1944, a petition was filed by a group of 5% bondholders, referred to as the Lynch interests, joined in by the Atlantic Coast Line Railroad Company, proposing a new plan of reorganization whereby Atlantic Coast Line would secure control of Florida East Coast by a forced sale to A.C.L. of 60% of the new common stock of the reorganized company. This proposal was unanimously rejected by the Commission, for the reason, amongst others, that the guaranties and cash expenditures to be made by Atlantic Coast Line would result in an unwise increase in its fixed charges.
Instead, on January 8, 1945 (266 I.C.C. 151-193), the Commission unanimously approved a second plan proposing a simple, workable internal reorganization along the general lines of the first, which recognized and continued the 5% bondholders as the equitable owners of the property, no drastic change in ownership being suggested, although it was then known to the Commission that the duPont interests, acting through its...
To continue reading
Request your trial
-
Schirra v. Delaware, L. & WR Co.
... ... In Tiller v. Atlantic Coast Line Railroad Co., 1942, 318 U.S. 54, 63 S.Ct. 444, 446, 87 L.Ed. 610, the ... ...
-
Atlantic Coast Line Railroad Co. v. St. Joe Paper Co., 15244.
...R. Co. v. St. Joe Paper Co., 5 Cir., 179 F.2d 538, certiorari denied 339 U.S. 929, 70 S.Ct. 627, 94 L.Ed. 1349; In re Florida East Coast Railway Co., D.C., 103 F.Supp. 825; Atlantic Coast Line Ry. Co. v. St. Joe Paper Co., 5 Cir., 201 F.2d 325, certiorari granted 345 U.S. 948, 73 S.Ct. 866,......
-
St Joe Paper Co v. Atlantic Coast Line Co Lynch v. Atlantic Coast Line Co Aird v. Atlantic Coast Line Co Welbon v. Atlantic Coast Line Co
...Interstate Commerce Commission for hearings on a plan of reorganization formulated by the bondholders' committee. In re Florida East Coast Ry. Co., D.C., 103 F.Supp. 825. In the course of the next ten years, many proposals have been considered by the Commission. Most of them were rejected f......
-
In Re Florida East Coast Ry. Co.
...179 F.2d 538, 545. It is reaffirmed today. Rehearing denied; BORAH and RUSSELL, Circuit Judges, dissenting. 1 In re Florida East Coast Railway Co., D.C., 103 F.Supp. 825. 2 In re Florida East Coast Railway Co., D.C., 81 F.Supp. 3 Atlantic Coast Line Ry. Co. v. St. Joe Paper Co., 5 Cir., 179......