Kreuger Finale

Last week the stockholders of Swedish Match Co., meeting at Joenkoeping, Sweden, approved a new stock issue of 1,100,000 Class B shares. Next day Manhattan newspapers noted briefly that a readjustment plan proposed last April for Kreuger & Toll debentures had been accepted by the U. S. holders. These two occurrences meant that at last thousands of investors could be sure of realizing something on the colossal wastebasket of international paper spilled by Ivar Kreuger when he shot himself in Paris in March 1932. With the $2,500,000 contribution which Swedish Match will be able to make from the proceeds of its new issue, Kreuger & Toll will have amassed about $20,000,000 in assets for holders of $47,000,000 in debentures.

To this end, some of Wall Street's ablest have exerted themselves through four years of financial diplomacy. The debenture holders' protective committee, headed by Grayson Mallet-Prevost Murphy, formed only a month after Kreuger's suicide, entered a race to find assets where it was generally believed that no assets existed. A Committee of Investigation appointed by the Swedish Government early reported: "Our examination has reached the point where we can state definitely that there will be little, if anything, for distribution to unsecured creditors. . . ."

Nucleus of the Kreuger enterprises, the originally honest construction business of Kreuger & Toll had become by 1932 nothing but a holding company for International Match and Swedish Match and a catch-all for Kreuger's credit deals. The report of the Swedish investigating committee seemed to confirm popular belief that Kreuger & Toll was hollow right down to the ground, that the Kreuger & Toll debentures sold by Ivar Kreuger in Europe and the U. S. in 1929 were about as worthless as any Kreuger securities except those that Kreuger had forged by hand.

Nevertheless the great Manhattan banking houses of issue through which these debentures had been sold--old Lee, Higginson & Co., old Guaranty Co. of New York, old City Co. of New York--clung to the belief that when Mr. Kreuger had said "secured" he meant, in this instance, "secured." They staffed and supported the protective committee of Mr. Murphy and another formed by Bainbridge Colby and Samuel Untermeyer. These committees sent lawyers to Stockholm, verified the existence of collateral for the debentures, petitioned the Supreme Court of Massachusetts to appoint for its safekeeping a New York trustee. They fought the claims brought by the creditors of International Match and Swedish Match, which alone remained in business, against the dubious assets of Kreuger & Toll. When it appeared that Swedish law might defeat them, they persuaded the other two groups to participate in extra-legal negotiations.

First result of these was the formation of an International Committee headed by Norman H. Davis. In the spring of 1934 the International Committee reported not only that valuable assets remained to Kreuger & Toll but that a three-way re-organization was still possible. Eventually, however, the committee-changed its mind about rehabilitating the whole match business, and principal groups got busy again hunting for realizable assets.

Last stage in these efforts occurred in 1934 when the Murphy and Colby committees started proceedings in New York Supreme Court to foreclose on the Kreuger & Toll collateral, get cash for debenture holders. It was expected that "the proceeding would be reached on the court calendar for entry of a decree of foreclosure at approximately the same time when it could be expected that intercompany settlements would be concluded." Timing was right: intercompany settlements were concluded last month before the Kreuger & Toll referee in bankruptcy in Manhattan, were stamped & sealed last week by the action of Swedish Match.

The securities which Ivar Kreuger had set aside as collateral for his debentures included Hungarian Land Reform Mortgage Bonds, Republic of Latvia bonds, Yugoslavian Bonds, Rumanian bonds and 59 gold bars. Aware that, except for the gold bars, these securities would bring even less than their present full value at a foreclosure sale, the Murphy and Colby committees last April filed a readjustment plan with the SEC by which a new company would be created, officered by the committees, to buy in the collateral and administer it for the benefit of the debenture holders, who would be given stock in the company. This plan was declared in effect last week. Meantime the creditors of International Match have managed to discover enough assets to give them at least a 10%, dividend in addition io 5% already paid. Kreuger & Toll and International Match stockholders were wiped out. All that remains alive of the Kreuger empire is Swedish Match.

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