Cheap Relief

In nearly every big law office in the land one morning last week at least one partner sat watch in hand, fidgeting for high noon, E. S. T. At precisely that hour President Roosevelt signed the Corporate Bankruptcy Bill. The exact minute of enactment was important because the new law instructed Federal judges to consider all bankruptcy petitions in the order received. The President wanted each & every prostrate U. S. corporation to have the same opportunity to rise and pray for cheap relief.

Prime feature of the new Bankruptcy law is a provision authorizing a Federal judge to approve a corporation reorganization plan satisfactory to two-thirds of its creditors, make the plan binding on the minority. In the past relatively small groups of recalcitrant creditors or stock holders have time & again held up all attempts at reorganization until they were bought off with cash. Result was that co-operative groups were penalized, and receiverships dragged out into endless litigation with fabulous fees for all.

The name of Franklin D. Roosevelt was hardly dry on the law last week before scores of expensive corporate lawyers streaked for the nearest Federal judge. They represented or opposed an appalling roster of mismanaged, uneconomic or thoroughly deflated business ventures. Some of the companies had been in receivership or bankruptcy so long that most people had forgotten that they were there. Others were so close to trouble that their security holders fled to court to escape a crash. Their composite history was an unexpurgated record of all the corporate sins of the last decade.

First to pray for cheap relief in Washington was National Press Building, erected in the 1928 boom which Halsey,

Stuart & Co. so enthusiastically abetted. The National Press Building which houses the National Press Club and many a Washington correspondent started to go under when the Treasury gave up six floors used by the Bureau of Internal Revenue.

In Manhattan, first was Radio-Keith Orpheum, which subsided into receivership early last year. Boom-time theatre rentals got RKO, and even a voluntary reorganization, which gave control to Radio Corp. of America, was of no avail. Quick to join the sad parade was United Cigar Stores, which toppled into bankruptcy in 1932 because its management had been tempted to speculate in real estate as a sideline. Another was Associated Telephone Utilities, which I. C. C. Commissioner Splawn lately held up to Congress as a horrible example of inflated capitalization. Paramount Publix, once believed to be so conservatively managed that Kuhn, Loeb gladly underwrote its bonds, was in line early. Innocent-looking contracts to repurchase its own stock at $80 per share had tripped Paramount. Disgruntled bondholders grabbed at a new means to throw Associated Gas & Electric into the courts. Others include National Department Stores, Roxy Theatre Corp., Hamilton Gas.

In Chicago, bondholders of Samuel Insull's Middle West Utilities petitioned for reorganization in bankruptcy rather than in equity. In St. Louis bondholders in Laclede Gas and St. Louis Public Service marched up to the judge, demanding a new corporate deal. In Wilmington three prime examples of helter-skelter public utility holding companies were dusted off --Central West Public Service, Consolidated Gas Utilities. National Public Utilities. And from coast to coast countless other corporations or their long suffering security holders rushed for shelter under the wide roof of Section 77th.

All this hopeful commotion last week in no way assured early resurrections for the lean ghosts of 1929. As all lawyers know, it is a long and thankless task to corral even two-thirds of any big company's creditors including bondholders. One of President Hoover's last acts was to sign a bankruptcy bill which was supposed to make it easy for railroads to scale down top-heavy funded debt. A dozen or more carriers have since plunged into bankruptcy under this law but not one has yet been able to climb out.

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