In re New York, Susquehanna & Western R.

103 F. Supp. 981, 1951 U.S. Dist. LEXIS 3781
CourtDistrict Court, D. New Jersey
DecidedJuly 11, 1951
DocketNo. 26175
StatusPublished
Cited by3 cases

This text of 103 F. Supp. 981 (In re New York, Susquehanna & Western R.) is published on Counsel Stack Legal Research, covering District Court, D. New Jersey primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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In re New York, Susquehanna & Western R., 103 F. Supp. 981, 1951 U.S. Dist. LEXIS 3781 (D.N.J. 1951).

Opinion

SMITH, District Judge.

This proceeding has for its object the reorganization of a railroad corporation, hereinafter identified as the Debtor, under Section 77 of the Bankruptcy Act, as amended, 11 U.S.C.A. § 205. The original plan of reorganization which had been approved by the Interstate Commerce Commission and certified to this court, pursuant to the provisions of the said Act, was referred back to the Commission for reconsideration on June 12, 1950. (See Order No. 427 entered June 12, 1950). The reasons which prompted this action by the court are fully discussed in an opinion which was filed on June 7, 1950; further discussion of these reasons seems unnecessary.

The proceedings were reopened by the Commission and a further hearing was held for the purpose of “receiving (a) evidence relating to modification of the plan, (b) evidence essential to bring the record of the (D)ebtor’s operations up to date, and to assist in reconsideration of the plan, and (c) any other evidence pertinent to the reconsideration of the plan or the development of a new plan.” Thereafter the original plan of reorganization was modified and, as modified, approved by the Commission. The modified plan of reorganization was certified to the court pursuant to subdivision d of section 77 of the Act, and is now before the court for approval. The approval of the Plan of Reorganization is recommended and urged by counsel appearing on behalf of the interested parties affected by the plan. The only objection is that of Miss Edith A. Merritt, who as of this date holds but two “General Mortgage Bonds.”

Capitalization

The original plan of reorganization, as proposed by its proponents, was predicated upon a proposed capitalization of $16,250,-000, exclusive of equipment obligations in the approximate amount of $452,000. This proposed capitalization was adjusted downward after hearings on the plan and hearings on the several petitions for a modification of the capital structure. The present Plan of Reorganization proposes a total capitalization of $15,500,000, exclusive of equipment obligations. There are no objections at this time to the proposed capitalization, and we therefore see no reason to disicuss it at length.

The proposed capitalization of the Debtor, as ultimately modified by the Commission, includes the following items:

Equipment Obligations ...... $ 452,844.

Terminal First Mortgage Bonds ................... 2,000,000.

First and Consolidated Mortgage Bonds .............. 3,000,000.

General Mortgage Income Bonds ................... 4,000,000.

Preferred Stock ............ 3,000,000.

Common Stock (No par value) 3,500,000.

Total .................. $15,952,844.

It should be noted that the Commission originally approved a proposed capitalization of $14,000,000, exclusive of equipment obligations. An increase of $1,500,000 was approved by the Commission ai¿ter hearings [983]*983on the several petitions for modification. The increase is primarily reflected in the more equitable treatment accorded the holders of General Mortgage Bonds.

We have examined the proposed capital structure of the Debtor in the light of the principles enunciated by the Supreme Court in the case of Ecker v. Western Pacific Railroad Corp., 318 U.S. 448, 63 S.Ct. 692, 87 L.Ed. 892. An examination of the record discloses that the proposed capitalization was established hy the Commission after a careful study and appraisal of many factors, to wit, the physical condition and value of the properties, the present and prospective earning power, the present and prospective traffic revenues, maintenance costs, the economic and physical value of improvements made by the Debtor during these proceedings, and the economic conditions which will contribute to the feasibility of the plan of reorganization.

It appears from the evidence that the probable earning power of the Debtor, properly evaluated, is adequate to support the proposed capitalization. There appears to be no reason to summarize the evidence because a detailed summary is embodied in the several reports of the 'Commission, particularly the Report of July 19, 1944, and the Supplemental Reports of March 5, 1945 and March 12, 1951. We have examined these reports and we find that the summaries therein contained are supported by the evidence. It is our opinion that the proposed capitalization is adequately supported by the evidence, is in accordance with legal standards, and is compatible with the public interest.

Treatment of Existing Securities

Present Mortgages and Securities.

The several properties of the Debtor are encumbered by mortgages which may be sufficiently identified as follows: Terminal Mortgage, Midland Mortgage, Refunding Mortgage, Second Mortgage, Paterson Extension Mortgage, and General Mortgages. These mortgages are valid and subsisting liens on the properties therein described and, by reason of after-acquired property clauses therein contained, on certain other after-acquired properties. See: In Re New York, S. & W. R. Co., 3 Cir., 109 F.2d 988. These mortgages were given to secure several bond issues which may be similarly identified as follows: Terminal Bonds, Midland Bonds, Refunding Bonds, Second Mortgage Bonds, Paterson Extension Bonds, and General Mortgage Bonds.

The scope of these mortgages and the relevant priorities thereof have been heretofore determined in proceedings in this icourt. See Findings of Fact and Conclusions of Law, filed May 25,1939; Order No. 129, filed May 25, 1939; Order No. 235, filed November 2, 1942; In Re New York, S. & W. R. Co., supra. These mortgages have been heretofore discussed by the United States 'Court of Appeals for the Third Circuit in the opinion hereinabove cited, and a further discussion seems unnecessary.

Allocation of New Securities.

The plan of reorganization provides for the issuance and allocation of new securities, which may be identified as follows: New Terminal Mortgage Bonds, New First and Consolidated Mortgage Bonds,'and New General Mortgage Income Bonds. The plan further provides for the issuance and allocation of preferred and common stock. The new securities and stock will be available for distribution to present security holders and holders of unsecured claims.

The new securities and stock are to be allocated and distributed in accordance with Section XIII of the Plan of Reorganization, which contains the following provisions:

“Holders of the existing Terminal bonds shall receive for each $1,000 principal amount thereof new Terminal bonds in a like principal amount, together with interest accruing on the existing bonds to January 1, 1944, in cash. Interest paid on the existing Terminal bonds for any period or periods subsequent to the effective date of the plan shall be applied to and treated as payments of interest on the new Terminal bonds.
“Holders of the existing bonds of the Midland Railroad Company of New Jersey [984]

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103 F. Supp. 981, 1951 U.S. Dist. LEXIS 3781, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-new-york-susquehanna-western-r-njd-1951.