Transcontinental Cases of 1922, 74 I. C. C. 48.... Transit Commission v. United States, 284 U. S. 360. Union Pac. R. Co. Unification, 189 I. C. C. 357---- Waco, B., T. & S. Ry. Co. Construction, 124 I. C. C. 769- 145 I. C. C. 543. Western Maryland Ry. Co. Bonds, 175 I. C. C. 168_. 184 I. C. C. 49- Page 478 525 385 401 390 15 169 168 171 172 37 38 205, 207 185 401 401 457 Western Pac. R. Co. Bonds, 189 I. C. C. 207; 189 I. C. C. West Jersey & Seashore R. Co. Control, 162 I. C. C. 735; 166 Wichita N. W. Ry. Co. Loan, 67 I. C. C. 522_ v. Chicago, R. I. & P. Ry. Co., 81 I. C. C. 513. Wisconsin Central Ry. Co. Lease, 79 I. C. C. 33. Yazoo & M. V. R. Co. Bonds, 189 I. C. C. 309; 193 I. C. C. 51. 51, 104 193 I.C.C. INTERSTATE COMMERCE COMMISSION REPORTS FINANCE DOCKET NO. 9843 LOUISIANA SOUTHERN RAILWAY COMPANY Submitted April 5, 1933. Decided April 25, 1933 Upon application, approval of a loan of $40,000 to the Louisiana Southern Railway Company by the Reconstruction Finance Corporation denied. Henry S. Fleming for applicant. REPORT OF THE COMMISSION DIVISION 4, COMMISSIONERS MEYER, EASTMAN, BRAINERD, AND MAHAFFIE BY DIVISION 4: The Louisiana Southern Railway Company, on February 13, 1933, filed an application to the Reconstruction Finance Corporation, hereinafter referred to as the Finance Corporation, for a loan under the provisions of section 5 of the Reconstruction Finance Corporation Act, approved January 22, 1932, as amended. By the terms of that act our approval is a condition precedent to the granting of loans to railroad companies. We have made the required investigation. The application.-The applicant requests a loan of $40,000 for a period of three years from the date thereof. Of the amount requested, $25,000 is desired to meet certain current obligations of the applicant and $15,000 to enable it to overcome deferred maintenance of road and equipment. The applicant states that it has been unable to obtain the necessary funds, in whole or in part, from any other source. It applied to three banks in New York and one, in New Orleans for a credit up to $150,000, but these institutions were unwilling to furnish the total credit asked or any less amount. An attempt to borrow from English banks was unsuccessful due to the prohibitive rate of exchange. It further states that no agreement has been or will be made to pay any person, association, firm, or corporation, either directly or indirectly, any commission or fee for the loan applied for and that no such payments have been or will be made. There are no existing loans to the applicant by the United States nor are there any existing claims by the applicant under sections 204 or 209 of the transportation act, 1920. The applicant is ineligible to become a party to the "marshaling and distributing plan, 1931 ", of the Railroad Credit Corporation due to the fact that it is in default of its fixed interest obligations. During 1932 the applicant derived $244.80 from the emergency increases in freight rates. Transportation properties and operations.-The applicant was incorporated February 27, 1897, under the laws of the State of Louisiana. It is controlled by William Parker and Mark Denne, of London, England, who jointly hold a majority of the outstanding capital stock. It has been operating independently since February 1, 1923, prior to which date it was under lease to the New Orleans, Texas & Mexico Railway Company. As of the date of the application the applicant owned and operated a line of railroad extending southerly along the east side of the Mississippi River from New Orleans, La., to Point-a-la-Hache, La., a distance of 43.80 miles, with a branch line from Poydras Junction, La., to Shell Beach, La., a distance of 15.10 miles. It also owned and operated 16.67 miles of yard tracks and sidings, making a total of 75.57 miles of all tracks. The equipment owned consists of 6 locomotives, 27 freight-train cars, and 3 passenger-train cars. The principal commodities carried in line-haul traffic are alcohol, asphalt, grain and grain products, hay, sand and gravel, petroleum and petroleum products, shells, vegetables, and machinery. Switching traffic consists of cotton, feed, flour, hides, livestock, lumber, petroleum, tankage, and vegetables. During the 11-year period 1921 to 1931, the revenue freight hauled averaged 211,300 tons per year. In 1930 and 1931 the tonnage was 96,855 and 91,988 tons, respectively. Necessities of applicant.-The applicant proposes to enter into an operating agreement with the Gulf, Mobile & Northern Railroad Company whereby its own operating costs will be greatly reduced and its traffic movement substantially increased, both as to road haul and switching movement. The proposed agreement is for a term of five years and covers only the operation of the applicant's line from New Orleans to Linwood, an approximate distance of 22 miles. The agreement provides that it is subject to the prior payment by the applicant of certain liabilities totaling approximately $25,000 and the raising of not less than $15,000 to be applied under the supervision of the Gulf, Mobile & Northern Railroad Company toward the improvement and rehabilitation of the properties to be used in such operation. The execution of the proposed agreement is thus conditioned upon the granting of the loan herein applied for. The important items of current indebtedness for which the applicant is urgently in need of funds are as follows: $800 for repayment of portion of loan received from Braithwaite Lands Liquidation Company; $710.99 to pay for rail purchased in November, 1931; $10,356.63 to pay State and parish taxes for 1932; $950 to pay 1932 and 1933 franchise cost due city of New Orleans; $1,028 to pay fire-insurance premium for 1933; $8,537.50 for repayment of advances to various parties for salaries and wages; and $2,082.30 for various miscellaneous bills payable. These items total $24,465.42. In addition to the above the applicant estimates its immediate needs for deferred maintenance and repairs on equipment, such as flues, lagging, and general class 5 repairs, at $9,000, and for deferred maintenance of way and structures, such as rails, ties, ballast, bridge repairs, and drainage, at $6,000. Security. The applicant offers as collateral security for the loan, $976,500 of its first-mortgage 6 percent refunding gold bonds, issued September 1, 1911, originally due September 1, 1931, at which time the maturity was extended to September 1, 1941, without our prior authorization. The total issue of the bonds outstanding is $1,000,000, of which $976,500 are held by stockholders of the applicant residing in England, who are willing to deposit the bonds with the Central Hanover Bank & Trust Company, New York, trustee under the indenture of trust securing the bonds, with instructions to deliver them to the Federal Reserve Bank, New York, to be held by it for account of the Finance Corporation as collateral security for the loan applied for. The indenture of trust securing the bonds covers all properties and franchises owned by the applicant at the date of the indenture and all thereafter acquired, within the limit of $20,000 per mile, and is an open-end mortgage. No interest has been paid on the bonds since September 1, 1914. The bonds have never been offered publicly and being in default of interest no present market value thereof can be assumed. As of June 30, 1918, we found the value for rate-making purposes of the property owned by the applicant, but used at that time by the New Orleans, Texas & Mexico Railroad Company, to be $825,000, and of noncarrier property owned $12,815. No working capital was included. New Orleans, T. & M. R. Co., 29 Val. Rep. 653, 705. Since June 30, 1918, and to and including December 31, 1931, the applicant has reported to us net additions and betterments to its property costing $20,896. If this sum be added to the values stated above, the total becomes $858,711. In Finance Docket No. 5662, we found a tentative value for ratemaking purposes of $930,000 for the property owned and used by the applicant during 1926. This amount includes $23,300 for working capital. The reported cost of net additions to the property between December 31, 1926, and December 31, 1931, is $51,373. If the value tentatively found for 1926, exclusive of working capital, be adjusted for these changes in property the amount becomes $958,073. As of November 30, 1932, the applicant's recorded investment in road and equipment was $1,163,986. Its authorized and outstanding capital stock amounted to a par value of $1,000,000 and its funded debt unmatured to $1,000,000. As of the same date it had current assets of $40,117; current liabilities of $1,101,957, including $1,068,750 of interest matured unpaid; and a corporate deficit of $1,939,955. For the 9-year period 1923 to 1931 railway operating revenues averaged $211,794, railway operating expenses $176,583, net railway operating income $7,316, and nonoperating income $3,784. Income available for the payment of interest averaged $11,079, interest on funded and unfunded debt $62,397, and net income a deficit of $51,318. The only year in which interest was earned during this 9-year period was 1925, when operations resulted in a net income of $46,700. During 1930 and 1931 the applicant had deficits in net income of $104,747 and $141,207, respectively. With minor estimates for the month of December, a deficit of $121,409 in net income for the year 1932 was experienced. The application contains a statement of probable revenues and expenses by months for the year 1933, in which cash balances of $11,438 on June 30 and of $13,771 on December 31 are estimated. For the purpose of protecting the city of New Orleans from the excessive high waters in the Mississippi River, the levee at Caernovan, La., was cut on April 29, 1927, thus placing all but 9 miles of the applicant's line out of operation until December 1 of that year. The applicant had not fully recovered from that loss before the present financial and industrial depression made itself felt. The applicant is practically without funds to operate. It has reduced its operating forces and staff to the lowest point consistent with the limited traffic handled. Wages and salaries have been reduced 27 percent below the 1931 level. During 1932 the applicant was unable to earn operating expenses in any one month |
