MOP's No. 23

Twenty-two times have the Van Sweringen brothers of Cleveland drafted and printed a plan for the reorganization of their insolvent $661,000,000 Missouri Pacific Railroad. Each time creditors, bond holders or stockholders have knocked it flat. Last week RFChairman Jesse Jones, who has loaned MOP $23,000,000. declared he did not believe the Van Sweringens would put forward another unworkable proposal. But when Plan No. 23 was filed with the Interstate Commerce Committee last week, MOP's other creditors were less confident than Mr. Jones of its ultimate success.

Hugely complicated, the new plan would consolidate MOP and 30 separate companies into one corporation, would replace 83 issues of indebtedness with three and 35 kinds of stock with two. Only issues left undisturbed would be equipment trust bonds. Of the three new issues of indebtedness, only one, a 4% mortgage, would bear fixed interest. Interest on the other two, a 5% convertible general mortgage and a 4% convertible note issue, would be paid only if earned. Net result would be to cut fixed charges from $25,966,000 to $7,503,000 per year. Thus while MOP would avoid insolvency in lean years by paying only fixed charges, it would be weighted down by an increasing burden of contingent charges during prosperous years. Finally, the plan would reduce the common holdings of Allegheny Corp., top Van Sweringen holding company, in MOP from 63% to about 40%, the preferred from 27% to 26.2%. Hopefully the Van Sweringens described their plan as an "earnest effort to respect the rights and preferences of every interest."

Two interests which did not think themselves sufficiently respected were the protective bondholders' committee headed by Vice President John W. Stedman of Prudential Insurance Co. and an independent committee chairmanned by Historian Charles A. Beard. The Beard committee issued no formal complaint last week but promised to have plenty to say later. The Stedman group objected particularly to substitution for first and refunding bonds of income bonds which would be "little more than preferred stocks under another name." Even more objectionable to it was the idea of allowing Allegheny Corp. to keep a 40% common stock equity in MOP. The Stedman committee wanted the Van Sweringen interest cut to 15%.

Actually, it is not the Van Sweringens who control MOP but a banking group headed by J. P. Morgan & Co. which loaned the Van Sweringens $48,000,000 and took Allegheny stock as collateral. This syndicate has the power to initiate reorganization plans and it presumably approved last week's proposal. But it also has the power to block such plans because it enjoys the status of an MOP creditor, having loaned that company $5,800,000.

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