Baldwin Bonds & Brady

On the New York Curb Exchange one afternoon last week the 6% bonds of Baldwin Locomotive Works closed at 185. On the face of it, this was odd, for less than two years ago Baldwin went into a voluntary 77B reorganization on the ground that it could not pay its debts. Moreover, it was still in reorganization. Nevertheless, next day Baldwin bonds skyrocketed 45 points to a new high of 230.

To a host of informed speculators, this gyration was no mystery but a great relief, because the man who sent the bonds soaring could just as easily have sent them plunging. That man was 80-year-old Federal Judge Oliver B. Dickinson, who sits in Philadelphia. Two years ago it became Judge Dickinson's task to approve or disapprove Baldwin's reorganization plan. That plan provided that one Baldwin 6% bond could be exchanged for 80 shares of new common stock in the locomotive works founded by Matthias W. Baldwin 94 years ago. With Baldwin's new stock selling last week for $30 per share on a when-&-if basis, each $1,000 bond--the equivalent of 80 shares of stock if the plan were approved--had an indicated value of $2,400. If the plan were not approved, the bonds would be worth no more than face value. But the plan met with Judge Dickinson's approval, and the speculators made a killing instead of losing their shirts.

They would have made their killing earlier had it not been for the opposition of William Augustin Brady, oldtime Broadway producer, father of Actress Alice Brady, husband of Actress Grace George. A large and longtime Baldwin stockholder, Mr. Brady objected to the treatment accorded to him by the plan. For every ten shares of old stock he would get in exchange only one share of new, together with the right to buy three additional new shares at $15 each. To Mr. Brady this looked remarkably like an old- fashioned freeze-out. So getting himself two smart young Manhattan lawyers, Walter Jack Loria and Seymour Edmund Martinson, Mr. Brady made his entrance on the Baldwin stage (TIME, Sept. 21).

It was the contention of Messrs. Loria & Martinson that the need of reorganization was open to question even at the time Baldwin filed, and that even if the need existed then, it certainly existed no longer. Grass grew in the Baldwin plant throughout Depression but with the renascence in railroad buying (TIME, Feb. 8) the great locomotive works now has more than $30,000,000 worth of orders on its books. No stockholder can justifiably complain if his equity is cut so that bondholders may get 100 cents on the dollar. But Stockholder Brady maintained that there was no excuse, at this late date, for putting the common shares through the wringer to give the bondholders more than 200 cents.

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