APPLICATIONS FOR INCREASE OF CAPITAL STOCK. I. IN THE MATTER OF THE APPLICATION OF THE UNION ELEVATED RAILROAD COMPANY OF BROOKLYN FOR THE APPROVAL OF THE BOARD FOR AN INCREASE OF CAPITAL STOCK FROM $1,000,000 To $9,040,200, FOR THE PURPOSE OF RETIRING AN EQUAL AMOUNT OF INCOME BONDS. March 12, 1889. The preliminary steps required by section 9 of the General Railway Act were duly taken, and the stockholders, at a meeting held on the 10th day of January, 1888, unanimously resolved to increase the stock to the above figures. The application was duly made to this Board, but it was refused at the time for reasons then given in a report which will be found on page 151 of volume 1 of the report of this Board for 1888, to which attention is directed. Since a further application has been made to the Board for a reconsideration of its determination, which at the time it said it would entertain for cause shown. The financial status of the company is as follows: Capital stock now outstanding.. First mortgage bonds authorized to be issued Second mortgage income bonds authorized to be issued, $1,000,000 7,000,000 2,500,000 8,040,000 It appears from statements made to the Board that the railroad company contracted with the construction company to issue the entire amount of the above securities for the construction and equipment of the road complete. The construction company agreed furthermore to pay all damages to abutting property owners. The conditions of the first mortgage were that bonds might be issued to the amount of $550,000 per mile for each mile of fully constructed road. The construction company was to receive second mortgage bonds to the amount of $185,000 per mile of road completed, with the proviso that in case the construction company should receive an amount of first mortgage bonds to exceed $500,000 a mile, an amount of the second mortgage bonds equivalent to such excess should be canceled, so that the amount of the first and second mortgage bonds should not be more than those of the Brooklyn Elevated Railroad Company, i. e., $685,000 a mile. In addition to the above first and second mortgage bonds, it was agreed that capital stock to the amount of $81,967.21 per mile of completed road, and income convertible bonds to the amount of $659,032.79 per mile for each mile of completed road, should be issued to the construction company. At the meeting of the stockholders, when the increase of stock was determined upon, the following resolutions were unanimously passed: "Whereas, this company, in order to secure the construction and equipment of its various roads, has been obliged to contract to issue in addition to its capital stock of one million dollars ($1,000,000), bonds to the amount of six hundred and fifty-nine thousand thirtytwo dollars and seventy-nine cents ($659,032.79) a mile for each mile of its roads under construction, payable in thirty (30) years, but convertible into its capital stock; and "Whereas, it is for the interest of the company that the obligation of such bonds should be removed by the substitution of stock; and "Whereas, an increase of the capital stock is necessary to be used to accomplish this purpose; it is therefore "Resolved, That the capital stock of this company be increased from the sum of one million dollars ($1,000,000), or eighty-one thousand nine hundred and sixty-seven dollars and twenty-one cents ($81,967.21) per mile for each mile of its roads, the construction of which has been contracted for, to the sum of nine millions forty thousand and two hundred dollars ($9,040,200), or seven hundred and forty-one thousand dollars ($741,000) a mile for such roads; such capital stock to consist of ninety thousand four hundred and two (90,402) shares of the par value of one hundred dollars ($100) each; provided, however, that the written approval of the Board of Railroad Commissioners to such increase shall be obtained; it is further Resolved, That the stock composing such increase shall be only issued to the Central Trust Company of the city of New York, to be exchanged by it for the convertible bonds above mentioned; that such stock shall be held by such trust company pending the construction and equipment of the roads of this company, the construction whereof is now contracted for, and shall only be countersigned and issued by it as each section of the said railroad is completed, and at the rate of six hundred and fifty-nine thousand thirty-two dollars and seventy-nine cents ($659,032.79) a mile for each mile composing such section. Until such stock is so countersigned and issued it will not be entitled to participate in any dividends that may be earned or paid upon the capital stock of this company, nor shall any of it be voted upon at any election thereof." This Board has invariably declined to approve an additional issue of stock where the outstanding obligations of the company have already been in excess of the cost of construction and equipment, unless the stock to be issued was subscribed for in good faith at par and the proceeds thereof intended for further construction or equipment. The case of the issue of stock to provide for the withdrawal of bonds already outstanding has not been heretofore before the Board. The Board has hesitated somewhat to approve of such an issue for the reason that it clears the way for a further issue of bonds. In this case, however, the company has addressed the following communication to the Board since its determination hereinbefore alluded to: "In order that you may feel assured that your consent to the increase of the capital stock of the Union Elevated Railroad Company, upon the application now before your Board, will not be used as a basis for a further issue of income bonds or other obligations, the undersigned hereby guarantee that if such consent be granted that the Union Elevated Railroad Company will not issue any further income bonds, and that it will not issue any further bonds of any kind other than those authorized by its present mortgages, unless forced to do so to meet some financial exigency which can not now be foreseen." This is signed by Messrs. Wingate & Cullen, and Messrs. Hoadley, Lauterbach & Johnson, attorneys for the Union Elevated railroad. It will thus be seen that the company has promised not to issue any further bonds except upon the conditions expressed. The exchange of the present income convertible bonds for stock will not increase the outstanding obligations, but will, as the Board is assured, facilitate the consolidation of the Union Elevated railroad with the Brooklyn Elevated railroad, its present lessee. It would also appear that it will enable the bondholders who may desire to exchange their bonds for stock, to have a voice in the management of the road, which otherwise they could not do. Inasmuch as the charter of the road restricts it to a charge of five cents for each fare, the public could suffer no hardship from the claim upon the part of the road to charge a greater fare under the pretended right of earning a larger percentage upon its capital. Furthermore, after the consolidation shall have taken place, a single fare of five cents would carry a passenger on any portion of the lines of these elevated railroads. The Board is informed that at present such charge is only made by the management, but that the companies have a right to charge a double fare where a transfer is made from one road to the other. A consolidation, therefore, under which this right would cease might be of considerable value to the traveling public. The Board is informed that probably a consolidation is impossible unless this increase is allowed and the bonds exchanged. The Board can see no abuse likely or possible to arise in consequence of this transfer of securities unless it might be said that this large amount of stock offers a greater opportunity for speculation than is possible with the smaller sum. While there may be some weight in this, it appears to be more than counterbalanced by the advantages herein before set forth, likely to occur from the transfer and consolidation. For the above recited reasons, the Board deems that it can without detriment to public interests, and it does hereby approve of the increase of the capital stock of the Union Elevated Railroad Company from $1,000,000 to $9,040,200, upon the condition that such stock when issued is to be exchanged for convertible income bonds at present outstanding and for no other purpose whatever. II. IN THE MATTER OF THE APPLICATION OF THE LONG ISLAND RAILROAD COMPANY FOR THE APPROVAL OF THE BOARD OF AN INCREASE OF THE CAPITAL STOCK OF THE COMPANY FROM $10,000,000 To $12,000,000, for THE PURPOSE OF EXCHANGING THE $2,000,000 ADDITIONAL STOCK FOR A LIKE AMOUNT OF THE STOCK OF THE BROOKLYN AND MONTAUK RAILROAD COMPANY HELD UNDER LEASE. March 20, 1889. The preliminary steps required by section 9 of the General Railroad Act have been taken by the directors and stockholders of the company. At a meeting of the stockholders held February the 23d, 1889, it appears that there was represented in person or by proxy 159,803 shares of the stock of the Long Island Company (out of a total of 200,000 shares), all of which voted in the affirmative. Pursuant to powers granted to the Long Island railroad by special statute and by the general laws of the State, the Long Island company became the lessee of the railroad and franchises of the Brooklyn and Montauk Railroad Company for the term of fifty years from October the 1st, 1879, and now holds and operates the same under a contract of that date and certain amendments thereof. Chapter 254 of the Laws of 1867, as amended by chapter 503 of the Laws of 1879, provides that "any railroad corporation created by the laws of this State or its successors being the lessee of the road of any other railroad corporation may take a surrender or transfer of the capital stock of the stockholders or any of them in the corporation whose road is held under lease and issue in exchange therefor the like additional amount of its own capital stock at par, or on such other terms and conditions as may be agreed upon between the two corporations." The authorized capital stock of the Brooklyn and Montauk Railroad Company is $2,000,000, of which $1,100,000 is preferred and $900,000 is common stock. The reports of the company show that twenty-four shares of common and thirty-six shares of the preferred stock remain. unissued, but they may be called for at any time under the plan of reorganization under which the company was organized. Under this state of the law and the facts, the Long Island Railroad Company have submitted to the holders of the preferred and common stock of the Brooklyn and Montauk Railroad Company a proposition for the surrender or transfer of their stock, which the Board is informed by the counsel of the Long Island Railroad Company has been accepted by all of the holders of the said preferred and common stock except about 375 shares, representing $37,500 par value out of the $2,000,000, the holders of the outstanding stock having the option to accept the proposition at any time on the same terms and conditions. To complete the surrender and transfer of the Brooklyn and Montauk stock and the issue of additional Long Island stock in exchange therefor, it becomes necessary to increase the capital stock of the Long Island Railroad Company two millions of dollars. Chapter 368 of the Laws of 1867 makes applicable to the Long Island Railroad Company, the provisions of section 9 of the General Act with regard to the increase of capital stock. The acquisition of a leased or connecting line of road pursuant to the express authority of the charter and in conformity to law, is obviously one of the direct means to completing and operating the system of roads contemplated by the charter, so that the present case is one where the capital stock of the company, in the language of the statute, "is found to be insufficient for constructing and operating its road" in every substantial sense, taking together the special charter of the company and this provision of the General Railroad Act. The Board deems, therefore, that the increase of stock for the purpose of acquiring the leased line comes within the provisions of section 9. In view of the above recited facts, the Board is of the opinion that it can with propriety, and it does hereby approve of the increase of the capital stock of the Long Island Railroad Company, from $10,000,000 to $12,000,000, with the understanding that the increased stock of $2,000,000 is to be exchanged for a like amount of the stock of the Brooklyn and Montauk Railroad Company, and that the stock of the latter, when exchanged, is to be canceled. IN THE III. MATTER OF THE APPLICATION OF THE SOUTH BEACH RAILWAY COMPANY FOR THE APPROVAL OF THE BOARD OF AN INCREASE OF ITS CAPITAL STOCK FROM $50,000 to $100,000. April 2, 1889. The preliminary steps required by section 9 of the General Railway Act have been taken by the directors and stockholders of the company. It appears from the papers filed with the Board that no part of the railroad has yet been constructed; that at the inception of the enterprise it was intended to construct a road about one mile in length; that subsequently it was determined to increase the length of the line to three miles of double track. An affidavit has been lodged with the Board, dated the twenty-first of March, estimating the cost of such three miles, with equipment, real estate, etc., necessary, at $145,000. At a meeting April the second the president, Mr. F. H. Skeele, informed the Board that it was in contemplation of extending still further so as to make the length of the line about four miles of double track. The entire amount of the original capital stock, $50,000, has been subscribed. The Board is led to understand that the additional $50,000 will be subscribed as soon as the approval of the Board to increase to that amount is given. The Board deems that the proposed amount of stock, viz., $100,000, is not too much for such an enterprise, and hereby approves of the proposed increase of stock from $50,000 to $100,000. |