Up Comes the M. & St. L

They used to call it the "Misery & Short Life," and the "Maimed & Still Limping." But last week the Minneapolis & St. Louis Railroad Co. finally came out of one of the longest receiverships in railroad history. And the bondholders who have stayed with it through 20 long years of bankruptcy finally had a good thing.

Worms & Snails. The M. & St. L. was a rackety, poor man's railroad long before it slipped into receivership in 1923. Begun in the '70s by Minneapolitans eager to challenge Chicago's monopoly of Midwestern railroading, the line stretched itself into 1,690 miles of jerkwater track running north & south across Minnesota and Iowa, with branches to Peoria and Leola, S. Dak. It never got to St. Louis--and from the day its first track was laid, it was more often in than out of the courts. Its debt was too high, its farm traffic too meager and too seasonal. In the Midwest its sway-backed boxcars, rusty rails and wheezing locomotives were more laughing stock than rolling stock.

But somehow, deficit by deficit, worms, snails, puppy dog's tails and all, the M. & St. L. creaked along. It took the courts six and a half years -- from the time a small creditor threw it into bankruptcy in 1923 -- even to get around to ordering a foreclosure sale. Forty-two times Howard S. Abbott, Minneapolis master in chancery, solemnly offered the road for sale, heard no bids. But last year, while Abbott was sick abed, another master made the sale, and for some $2,000,000 the road's reorganization managers, Coverdale & Colpitts, transportation engineers, bought in its $79,000,000 of "assets." Last week the directors met and approved the final legal technicalities.

Out of the Nowhere. On a balance-sheet basis, M. & St. L.'s bondholders got mostly a $53.000,000 deficit (the water logged stockholders were washed out com pletely). But for the future they got all the stock (150,000 shares) in an almost debt-free road. And they got Lucian Charles Sprague, M. & St. L.'s receiver for eight years, as president.

White-haired, Illinois-born Railroader Sprague came up the hard way: callboy telegrapher, machinist's apprentice, fireman, etc. After he had gone back to railroading, and had been promoted a few times, he picked up a new hobby: training race horses, particularly has-beens. Year after year his broken-down nags won purses for him (one big grey won 16 out of 20 races, after Sprague bought him for $175, pulled a tooth that had made him "outlaw" when the bit touched it).

When Lucian Sprague took over the broken-down M. & St. L. in 1935, his desk was strewn with $424,000 in current bills, a $254,000 payroll was due in two weeks, $46,000,000 worth of bonds had been in default since 1922--and there was only $103,000 in the bank. He had to sell some of his battered boxcars for scrap to get enough cash to repair his rotten rails. But he got every discouraged M. & St. L. employe to help him sell people on "The Peoria Gateway," amazed potential customers by helping them sell their own goods and services too. Since then he has poured $20,000,000 back into new equipment, has located over 300 new industries to ship via M. & St. L., and has diversified its freight load over the seasons, so that its accountants no longer automatically reach for the red ink seven months out of every twelve.

Sugar & Spice. Last year, still stuck with its anachronistic fixed charges, M. & St. L. once again turned in a whopping bookkeeping deficit. But this year, war boomed it into a profit even before the reorganization officially cut its debt to $2,015,000, and the road proudly turned down a $4,000,000 RFC loan because it had enough cash of its own. For the first eight months of 1943, M. & St. L., no longer limping, earned over $2,000,000--enough sugar & spice to pay its new small fixed charges more than 20 times over.

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