Wabash to Pennsy

Approved by ICC last week was a reorganization plan for the second major railroad to fall victim to depression--the 2,409-mile Wabash, in the courts since 1931 (the Seaboard has been in since 1930). The Wabash, known as "the road that starts nowhere and ends nowhere," has defaulted four times in 66 years, spent 22 of them in receivership. It lacks seaport and gateway terminals, depends on other lines to feed it about two-thirds of its business. But its straight-sweeping main line from Buffalo to Kansas City avoids the congestion at Chicago and St. Louis. The Wabash was therefore one of the biggest chips in the great consolidation poker game played by the Eastern trunk lines in the '20s.

The Pennsylvania wanted the Wabash so badly it paid $63,041,549 for 49% of its stock in 1927-28, much of it to the late, great, foxy Leonor Fresnel Loree. The next year ICC came out with its "final'' consolidation plan. Instead of the four systems expected by the Eastern railroads (New York Central, Pennsylvania, Baltimore & Ohio, Chesapeake & Ohio-Erie-Nickel Plate), ICC proposed five--the fifth being a looping road-to-nowhere based on the Wabash and Seaboard. And instead of approving the Pennsy's expensive purchase, ICC began anti-trust proceedings.

Pennsy fought ICC in the courts, finally won. ICC also gave up its fifth-system dream. Last week's decision, if approved by the Federal court, will clear the way for full control of Wabash by Pennsy. Its $63,041,549 investment, along with other common stockholders', is wiped out by the reorganization plan,* but Pennsy can buy up all of the new common-stock issue for $7,626,872 ($12.75 a share). The Pennsylvania System, which already has 10,841 miles of road, will thus become 20% bigger, bestriding not only the East but the Mississippi, to Kansas City and Omaha.

Before Pennsy could get ICC approval of this arrangement, it had to overcome objections by the rival New York Central. Pennsy now owns a 30% stock interest in the Lehigh Valley Railroad (which connects Buffalo with New York Harbor); Wabash owns another 21%; and the thought of a Pennsy-Wabash-Lehigh tie-up gave New York Central competitive fits. As a fit-cure, Pennsy agreed to deposit its Lehigh stock, along with the Wabash's, with independent voting trustees.

Last month was the first July in ten years in which the New York Telephone Co. put in more telephones than it took out. The score: 1,687 net installations v. 3,393 net removals in July 1940. A reason: unusual number of beach cottages rented by defense workers.

*The plan will cut Wabash's capitalization from $330,759,265 to $192,647,795, its fixed charges from $7,391,362 to $2,558,418 a year. Income available for fixed charges has averaged $3,973,914 in the last nine years.

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