Platt v. Philadelphia & R. R Co.

• Decision Date: 29 October 1894
• Docket Number: 1.
• Citation: 65 F. 872
• Parties: PLATT v. PHILADELPHIA & R.R. CO. et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

65 F. 872

PLATT v. PHILADELPHIA & R.R. CO. et al.

No. 1.

United States Circuit Court, E.D. Pennsylvania.

October 29, 1894

Thomas Hart, Jr., and Samuel Dickson, for receivers.

Nathan Bijur, for Isaac L. Rice.

Hetty H. R. Green and Mr. Hartshorne, for committee.

This was a petition of the receivers of the Philadelphia & Reading Railroad Company and the Philadelphia & Reading Coal & Iron Company, together with the Philadelphia & Reading Railroad Company, for authority to enter into an agreement for the partial readjustment of the affairs of the Philadelphia &amp Reading Railroad and Coal & Iron Companies, and to make the payments therein provided if the plan be carried into effect. The petition was referred to George L. Crawford, Esq., as special master, whose report follows, containing the terms of the said agreement and his comments thereon, with a recommendation that the prayer of the petition should be granted:

After the hearing of the argument upon the said petition, after due advertisement, had begun on October 15, 1894, before the court, its then pre- occupation with jury trials caused it to refer that hearing to me, and the parties appearing thereupon adjourned to my office, 606 Chestnut street, Philadelphia, October 15, 1894 12 M., for that purpose, whereat then appeared C. Stuart Patterson, Esq., for Mr. Platt; Samuel Dickson, Esq., for the Philadelphia & Reading Coal & Iron Company and the Philadelphia & Reading Railroad Company, and the receivers Messrs. Sulzberger, Johnson, Carey & Reeves, of counsel for the reorganization committee of Mr. Olcott; John R. Dos Passos and Charles B. McMichael, Esq., for the Fitzgerald committee, intervening with petition on behalf of Mr Whitney, a general mortgage bondholder; Nathan Bijur, Esq., for the Hartshorne committee; Francis I. Gowen, Esq., for the Lehigh Valley Railroad Company; John B. Gleason, Esq., for George L. Rogers, a first preference income bondholder, intervening by petition,-- and when and where the argument upon said petition was proceeded with. Mr. Dos Passos then presented the intervening petition hereto annexed, marked 'Exhibit B.' He also called upon the counsel for the receivers to produce, and they produced, the resolution of the Philadelphia & Reading Railroad Company touching the proposed plan, a copy whereof is hereto annexed, marked 'Exhibit C.' A copy of the proposed plan, in the form of an agreement between the general mortgage bondholders, income mortgage bondholders, and stockholders, and their committee of readjustment, and a copy of the proposed agreement between that committee and the petitioners, are annexed to the said petition as a part thereof.

The present receivers have been appointed upon a class bill for foreclosure, filed by a holder of third preference income bonds of the Philadelphia & Reading Railroad and Coal & Iron Companies. They have outstanding prior general mortgage bonds, amounting to $44,491,188.77, bearing 4 per cent. interest, maturing semiannually, January and July 1st, which for the past 18 months is in arrear and unpaid. The receivers, under an order made July 6, 1893, authorizing them to issue receivers' certificates, have issued them to the amount of $3,640,000. The Philadelphia & Reading Railroad Company also owe other general, well-secured indebtedness to the amount of $3,843,000, and further indebtedness, with interest, aggregating $7,533,000 for necessary equipment, for which a large part of the value thereof has been paid, leaving a valuable equity of the company therein over the said debt therefor. The receivers, upon the payment of the said secured general indebtedness, will have $10,000,000 of 5 per cent. collateral trust gold bonds of the Philadelphia & Reading Railroad Company, secured by stocks and bonds of its associated companies, which are a valuable and necessary part of its system, to dispose of for payment of the said classes of indebtedness, which, by reason of priority of liens, or value of securities pledged therefor, are entitled to a preference in the disposition of the proceeds of the said collateral trust bonds, over other indebtedness of the company.

Some of the said general mortgage bondholders have combined to enforce foreclosure of their mortgage, under due legal proceedings. The said plan of readjustment proposes, in substance: (1) The formation of a committee for readjustment to carry out the plan, fix the time to be given for its approval by the parties in interest, with the board of managers of the railroad company, to determine whether a sufficient amount of income bondholders and stockholders, have assented thereto to make it effective, or to declare it abandoned, and to determine the form of the writings and do the acts requisite to carry it into effect if practicable. (2) That the general mortgage bondholders shall sell to the committee 10 coupons or interest on their bonds, accruing from July 1, 1893, to January 1, 1898, both inclusive, the committee if they find the plan to become effective, to abandon foreclosure proceedings, unless default should occur in payment of the interest on said bonds, other than the interest already in default, or in payment of the purchased coupons or interest and interest thereon, as provided by the plan, or in payment of the interest accruing after January 1, 1898. (3) That the income bondholders shall purchase to the amount of 10 per cent. of their holdings said 5 per cent. collateral trust gold bonds at par, paying therefor when required by the committee, and depositing their bonds with the committee as security therefor, or immediately paying said 10 per cent. purchase money, and in either case receiving in exchange a proper negotiable receipt for said trust bonds when ready for delivery; or pay 3 per cent. of their holdings without receiving any of said trust bonds. (4) That the stockholders shall contribute 10 per cent. of the par of their stock in purchase of that amount of said collateral trust bonds at par, or $1.50 per share, without receiving any of said trust bonds, their stock to be assigned to a trustee as registered owner, and they receiving a certificate from the trustee for their equitable interest, said trustee to vote upon the said stock for one-half of the board of managers and president, as directed by resolution of a meeting of the general mortgage bondholders, and for the other half of the board as directed by resolution of a meeting of the holders of the assenting trust certificates, until the coupons and interest of the general mortgage bondholders purchased by the committee be paid, after which the trustee shall vote, until payment of the principal of the general mortgage bonds, for one-third of the board, as directed by the meeting of the general mortgage bondholders, for another third by the income mortgage bondholders, and the remaining third of the board and the president by the holders of the assenting trust certificates. (5) That, if the plan be abandoned, and foreclosure take place, the committee shall, on reorganization by them after sale, recognize the income mortgage bondholders and stockholders assenting to the plan, or, at the option of the committee, return them their securities and amounts paid thereon.

The proposed agreement between the said committee and the receivers and the Philadelphia & Reading Railroad Company recites that the committee, to insure the carrying of the plan into effect, has organized a syndicate to advance the money to purchase the said accrued coupons and interest on the general mortgage bonds at par from such holders thereof as prefer to receive the cash therefor, and a second syndicate to purchase said collateral trust bonds not taken by the assenting income bondholders and stockholders at 70 per cent. of their par value, provided that a guaranty commission of 2 1/2 per cent. be paid to each of said syndicates, and provides: (1) That the first-mentioned syndicate shall buy the said coupons and interest maturing on the general mortgage bonds for 5 years from July 1, 1893 inclusive, with the accrued interest thereon, and hold them for 10 years from the date of purchase, upon condition that the holders of the accompanying bonds shall sign the bondholders' agreement of Mah 7, 1894 (providing for foreclosure), and present their bonds to be stamped under the terms of the said readjustment agreement. (2) That the receivers and railroad company shall pay the interest accrued on the coupons and interest in default, and thereafter semiannually on the par of the purchased coupons and interest, at the rate of 6 per cent. per annum. (3) That the Philadelphia & Reading Railroad Company, and, if the plan be duly declared effective, the receivers, shall pay the said 2 1/2 per cent. commission upon the amount underwritten for the purchase of the said coupons and interest. (4) The purchasers shall hold them with all their rights, except of foreclosure, unless default occur under this agreement, or under the general mortgage, other than what has already occurred, or sufficient of the junior security holders shall not consent to the readjustment agreement, to make it effective in the judgment of the committee and board. (5) That the receivers and railroad company shall devote its surplus earnings to retire the said purchased coupons and interest at the rate of 105 and accrued interest, within 10 years from the date of the purchase. (6) That if sufficient bondholders and stockholders shall assent to the plan to make it effective in the judgment of the committee and board, without foreclosure, the railroad company shall sell and deliver its collateral trust bonds not subscribed for as aforesaid at 70 per cent. to the second-mentioned syndicate, and pay it a guaranty commission of 2 1/2 per cent. upon said...