Stockholders Lose

The railroad reorganization wringer squeezed tighter last week. Stockholders in two once-bankrupt carriers saw their chances of participating in juicy war profits gurgle down the drain. The Supreme Court upheld a lower court decision barring any revision of ICC's plan to streamline the financial structure of the Chicago & North Western Railway. A Federal court in New Haven approved, with slight modifications, ICC's amputation of the top-heavy debt of the New York, New Haven & Hartford Railroad.

The C. & N. W. plan cuts its capitalization from $555 million to $430, fixed charges from $16.4 million to $4.1.* The $500 million New Haven capitalization is knocked down to $326 million, and the backbreaking fixed charges of $17.4 million are cut to a modest $6.5 million, which is within earning reason. In both plans, the equities of the common and preferred stockholders were wiped out.

To many investors the court decisions of last week seemed ironical. The reorganization plans were drawn up during depression years by a pessimistic ICC which set the limit on fixed charges at what the railroads could earn in lean years. But these plans now got the green light at the close of a year in which rail income hit an alltime high. Estimated C. & N. W. gross for 1943 is $165 million, net $25 million.

The New Haven had its best-in-history financial year, with gross estimated at $180 million, net $34 million. This was 50% greater than in 1929, when the common stock sold for $108 1/2. Last week the New York Stock Exchange took New Haven stock off the board; last transaction was 62 1/2.

*Repayment of an RFC loan would bring capitalization down to $371 million, fixed charges to $3.8 million.

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