determine whether a plan "will be compatible with the public interest' obviously relates, in the main, to the proposed corporate and capital structure of the reorganized company. That structure must be such that the rehabilitated enterprise may have a reasonable prospect of satisfactory public service."

Without derogating in the least from the principles just quoted, we are of the view that, considering the broad scope of matters that may be included in a plan of reorganization, and particularly that a plan may provide for the rejection of contracts or for their assumption by the reorganized company, all of the applicable concepts of public interest contemplated by the Interstate Commerce Act are within the meaning of that term as used in section 77. In the New York Central Securities case, supra, the Supreme Court enumerated as criteria of public interest within the meaning of the Interstate Commerce Act "the transportation needs of the public," measures which would "best promote the service in the interest of the public and the commerce of the people," matters which have "direct relation to adequacy of transportation service, to its essential conditions of economy and efficiency, and to appropriate provision and best use of transportation facilities." Section 77, in fact, establishes a coupling link between it and the Interstate Commerce Act where in subsection (f) it requires that upon confirmation of a plan we shall—

without further proceedings, grant authority for the issue of any securities, assumption of obligations, transfer of any property, sale, consolidation or merger of the debtor's property, or pooling of traffic, to the extent contemplated by the plan and not inconsistent with the provisions and purposes of the Interstate Commerce Act as now or hereafter amended.

By the basic contracts and the railroads constructed pursuant thereto, the Central's railroad, in legal contemplation, was extended to the northern end of the northern extension and its traffic has moved ever since on that theory. Thus, since about 1911, both the Central and the Susquehanna have served the industries located on the three segments of railroad.

There is another aspect of this situation which we deem to be of importance. In acquiring title to the northern and southern extensions the Susquehanna's trustee made the following assumption:

The party of the second part (the trustee) hereby assumes all liability and obligation of every nature which now exists under and by virtue of the said contracts, agreements, leases and licenses which now exist against and rest upon the party of the first part (the Erie Terminals Railroad Company) under and by virtue thereof, and agrees to be bound by and to perform, fulfill and carry out all the liability and obligation of the party of the first part which exists under and by virtue of said contracts, agreements, leases and licenses, the assumption and agreement of the party of the second part contained in this paragraph "Second" to be binding upon his successors and assigns. [Parenthetical inserts supplied.]

The basic contracts were set forth in the application to the Commission for authority to acquire the properties and substantially the above-quoted undertaking was set forth in the report of division 4 granting the authority. See 249 I. C. C. 777, 780. Representations were made on behalf of the trustee to the court handling the Erie reorganization, to the court handling the Susquehanna reorganization, and to the Board of Public Utility Commissioners of New Jersey, in connection with applications for approval of the transaction, substantially to the effect that the rights of the Central under said contracts were not to be adversely affected by reason of the conveyance to the trustee.

Under all the circumstances, including both the question of public interest involved and the circumstances and conditions under which the acquisition of the northern and southern extensions was authorized and consummated, we are of the opinion and find that the requested provision conditionally rejecting the basic contracts should not be approved by us as part of the plan.

Miscellaneous matters. In order to clarify the treatment of certain outstanding obligations, the insurance group requests that the following provisions be made part of the plan:

Unpaid amounts which became due on coupons prior to June 1, 1937, aggregating about $8,287.50 shall be paid in cash at reorganization or by the reorganized company. To the extent that claims are filed and allowed on outstanding first and refunding mortgage bond-scrip certificates in the principal amount of $533 and coupon obligations of first-mortgage bonds due in 1895 in the amount of $30, such claims shall be classified in accordance with the court's classification and be satisfied in cash or new securities on the same basis as other claims in the same class or be disposed of otherwise as the court shall direct.

We approve the inclusion of these provisions in the plan.

The insurance group points (1) to the provision of each of the new mortgages as described in the approved plan authorizing, with our approval and with the concurrent action of the reorganized company and of the holders of not less than 75 percent in principal amount of all bonds outstanding under the mortgage, the postponement, within certain limitations, of the time or times of payment of any interest on, or the principal of the bonds and (2) to another provision to be contained in each of the mortgages authorizing the modification or alteration of the mortgage and of the rights and obligations of the company thereunder and of the holders of the bonds by the concurrent action of the reorganized company and of the holders of not less than two-thirds in aggregate principal amount of the bonds outstanding, with the proviso, among others, that no such modification or alteration shall alter or impair the obligation of the reorganized company to pay the principal of, or interest on, any of the bonds at

the time and place and at the rate and in the currency provided therein without the consent of the holder of such bond. The group believes that there is such conflict between these two provisions in regard to modification of the time of payment of interest and principal of the bonds as to lead to future disputes, and suggests that a clarifying provision be inserted. In order to remove any possible doubt as to conflict between these provisions, we will modify the plan so as to provide that the first provision referred to in this paragraph shall apply nothwithstanding any other provision of the mortgage.

We will also, on our own motion, modify the provisions authorizing modification or alteration of the mortgages that may be accomplished by the concurrent action of the company and of the holders of not less than two-thirds in amount of the bonds outstanding so as to provide that no such modification or alteration of the provisions of the Terminal mortgage or of the first and consolidated mortgage relative to sinking funds, or of the provisions of the general mortgage relative to sinking funds or security-retirement funds, shall be made without the approval of the Commission or such other regulatory body as may at the time have jurisdiction in the premises.

The group refers to the provision of the approved plan that holders of the preferred stock, voting as a class, shall have the right to elect not less than two directors after default of the equivalent of six quarterly dividends, and in the interests of clarification suggests that there be added to that provision the words "whether or not earned and whether or not the defaults are consecutive." We approve this clarifying provision and will modify the plan accordingly.

In the section of the approved plan relating to the appointment of voting trustees, it is provided that in certain contingencies the court shall appoint such trustee. As there may be occasion for such an appointment by the court after the termination of the reorganization proceeding, the group suggests that we add a clarifying provision that the appointment be made by the judge of the District Court of the United States for the District of New Jersey who may, at the time when the appointment is required, be in charge of the proceeding herein or, if these proceedings shall have terminated, by the senior judge in said district. We approve this more specific provision, with the explanation that it should also apply to approvals of appointments required by the plan. We will modify the plan accordingly.

In the first paragraph of article VII of the order of division 4 of July 19, 1944, describing the approved plan, after describing the rates of redemption of the new first and consolidated mortgage bonds on or before January 1, 1986, it was inadvertently stated that the rate of redemption would be 1 percent if redeemed thereafter and on or before January 1, 2000. The order should have stated additionally that

the rate of redemption would be 1 percent if redeemed after January 1, 1986, and on or before January 1, 1993, and one-half percent if redeemed thereafter and on or before January 1, 2000. We will correct the plan accordingly.

In article VII, paragraph 5(b), describing the approved plan it is provided that additional new first and consolidated mortgage bonds may be issued, among other things, to cover 75 percent of the cost of additions and betterments. A similar provision is made applicable by the approved plan to the issue of additional general mortgage income bonds. In view of the fact that, under our accounting classification, the entire cost of a unit of road property replacing with property of like purpose, a unit retired, is accounted for as an addition, and in order to avoid mortgage-debt inflation, the plan should be modified so as to provide that in the case of additions and betterments to property, made after January 1, 1944, other than new equipment, and additional fixed property as defined in the approved plan (or securities representative thereof) the 75 percent shall be applied to the net cost of the additions and betterments, the net cost to be determined by deducting from the cost the amount required by our accounting classification to be credited to capital accounts by reason of the retirement of any property replaced by property for or in respect of which any such expenditures shall have been made. We will modify the plan accordingly.

The plan as approved by us includes in the mortgages a provision permitting elimination from the mortgages, among other things, of the provisions relating to the additions and betterments fund in the event that the reorganized company shall be unified with any other corporation by consolidation, merger, sale, lease, or otherwise. We are of the view that such elimination should not be permitted. We will on our own motion modify the plan accordingly.

Attached hereto are appendix A showing in summary form the method of distribution of new securities to the several classes of claims and other data, as more particularly described herein and in the prior report, and appendix B showing in summary form the present capital structure, the distribution of new securities according to class of claim, summary of plan (including annual charges), and the distribution of new securities per $1,000 principal amount of claim. Conclusions.-Upon consideration of the record and the beforementioned petitions, we conclude and find:

1. That the report and order of the Commission, by division 4, dated July 19, 1944, approving a plan of reorganization for the New York Susquehanna and Western Railroad Company, pursuant to section 77 of the Bankruptcy Act, should be modified and amended, as herein specified, that the findings of division 4 contained in said

report, except as modified herein, should be, and hereby are, affirmed, and that, as thus modified and amended, the plan will meet the requirements of section 77 (b) and (e) of the Bankruptcy Act, as amended, will be compatible with the public interest, and should be approved.

2. That, except as the plan shall be so modified and amended, the petitions for its modification should be denied.

An appropriate supplemental order will be entered.

261 I. C. C.