In re Florida East Coast Ry. Co., 4827.
| Citation | 52 F. Supp. 420 |
| Decision Date | 19 October 1943 |
| Docket Number | No. 4827.,4827. |
| Parties | In re FLORIDA EAST COAST RY. CO. |
| Court | U.S. District Court — Southern District of Florida |
Davis, Polk, Wardwell, Sunderland & Kiendl and Edgar G. Crossman, all of New York City, for petitioning creditors.
Russell L. Frink, of Jacksonville, Fla., for reorganization trustees Scott M. Loftin and John W. Martin.
John B. L'Engle, of Jacksonville, Fla., for debtor Florida East Coast Ry. Co.
Frank P. Fleming, Guy W. Botts, Giles J. Patterson, and Henry P. Adair, all of Jacksonville, Fla., White & Case, of New York City, Stockton, Ulmer & Murchison, of Jacksonville, Fla., John G. Jackson, of New York City, Osborne, Copp & Markham, Charles Cook Howell, Charles Cook Howell, Jr., and Milam, McIlvaine & Milam, all of Jacksonville, Fla., Percival E. Jackson, of New York City, John A. Bussian, of Chicago, Ill., Frank E. Bryant, of Miami, Fla., Pitney, Hardin & Ward, of Newark, N. J., and J. Henry Blount, of Jacksonville, Fla., for intervenors.
Florida East Coast Railway Company operated under an equity receivership in this court from August 31, 1931, until January 25, 1941, when reorganization proceedings were instituted under Section 77 of the Bankruptcy Act, 11 U.S.C.A. § 205.
As of December 31, 1940, the debtor railway's capitalization was:
Capital stock outstanding ...... $37,500,000.00
First mortgage 4½% bonds
due January 1, 1959 .......... $12,000,000.00
First & 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' liabilities on said
date
Receivers' equipment trust
certificates, series "I" 3% $ 1,116,000.00
______________
Total capitalization and
Receivers' liabilities ... $95,796,000.00
As of December 31, 1940, the receivers had on hand cash aggregating $1,301,857.37. Interest on the First Mortgage 4½% bonds and on all equipment trust certificates was currently paid. Interest on the 5% First & Refunding bonds (due $1,125,000 semiannually) was in default since September 1, 1931, aggregating $21,375,000 on December 31, 1940. Unsecured indebtedness aggregated $2,688,668.32, plus interest. Potential unliquidated liabilities, disputed and in litigation, were about $750,000.
After hearings pursuant to 11 U.S.C.A. § 205(d) the Interstate Commerce Commission certified to this Court for consideration a plan of reorganization (252 I.C.C. 423, 453, 731) based upon the following capitalization:
Equipment notes ...................... $ 1,992,000.00
First mortgage series A
bonds, — to holders of present
4½% First Mortgage
bonds .............................. $12,000,000.00
General mortgage series A
bonds, — to holders of present
5% First & Refunding
bonds .............................. $ 4,500,000.00
Common stock (no par) 450,000
shares, — to holders of
present 5% First & Refunding
bonds .............................. $18,508,000.00
______________
Total capitalization ........... $37,000,000.00
In addition to the $12,000,000 of New First Mortgage bonds to be distributed to present First Mortgage bondholders, the proposed new First Mortgage authorizes the issuance of an additional $6,000,000 in bonds for new capital expenditures. This amount includes $500,000 in "free bonds," to be issued upon resolution of the new Board of Directors, and to be used for any proper corporate purpose, the aggregate limit of bonds under the new mortgage being $18,000,000 unless enlarged by a vote of 66 2/3 % of all outstanding bonds under the new mortgage.
The matter is now before the court for consideration of objections to the proposed plan, interposed by the holders of approximately 80% of the First & Refunding bonds and by the holders of about 6% of the First Mortgage bonds. No creditor has appeared in support of the plan.
Since the Interstate Commerce Commission considered the debtor's financial condition and formulated the plan now before the court, substantial and unforeseen improvements in the affairs of the debtor have developed as follows:
(a) Earnings have greatly increased over prior years, as shown below:
Total Income
Available for
Net Railway Fixed Charges
Operating and Contingencies
Year Income
1939 $ 743,699 $ 810,899
1940 $ 985,219 $ 994,131
1941 $1,580,527 $1,601,964
1942 $7,873,959 $7,985,400
19431 $9,004,940 $9,141,860
(b) As a result of these increased earnings, the cash position of the reorganization trustees as of October 1, 1943, is as follows:
Cash ............................ $14,288,433
Less obligations against above $ 224,678
___________
$14,063,755
Cash, special deposits awaiting
determination of mortgage
liens .......................... $ 546,446
War bonds purchased for tax
anticipation purposes .......... $ 3,000,000
Due Trustees on traffic balances
net ............................ $ 185,164
___________
Total cash, or equivalent
October 1, 1943 ............. $17,795,365
(c) Since the present plan was formulated, interest coupons maturing September 1, 1931, March 1, 1932, and September 1, 1932, on the debtor's First & Refunding 5% bonds, have been paid in the aggregate sum of $3,375,000. Interest on the First Mortgage 4½% bonds have been paid in full to June 1, 1943. Outstanding equipment notes have been reduced to $1,226,000.
The 1942 and 1943 earnings above shown are abnormal and temporary. They are not regarded by the Court as a sound basis for capitalization of the new company. Indications are, however, that the present...
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In re Florida East Coast Ry. Co., 4827.
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