962 Years Lost

In 1902 a portly, potbellied, black-mustachioed Philadelphia lawyer named John Graver Johnson (tops among U. S. corporation lawyers and trust protectors of his time) drew up a noteworthy document. It was an iron-clad lease by which Philadelphia Rapid Transit Co. promised to pay 49 small traction companies $7,100,000 a year for 999 years for the privilege of running its street cars over their right of way. For the stockholders of the 49 underlying companies--among them the Wideners, the Elkinses and other First Philadelphia Families--this was a mighty fine deal. Their original investment in one case consisted of some horses that went to the glue factory about 1874. They claimed recently in court that their property was worth $35,000,000, and the court valued it at $6,000,000, but between 1902 and 1939 they collected $250,000,000 rent on their lease. Last week their collections ended although their lease had still 962 years to run.

With a stroke of his pen Philadelphia's gaunt Federal Judge George A. Welsh approved P. R. T.'s reorganization plan (under 77-B), merged it with its 15 subsidiaries and 49 underliers into a single $85,000,000 corporation: Philadelphia Transportation Co.

To the shade of John Graver Johnson and to the 49 underliers the decision was a blow. As late as 1928 the city was on the point of condemning their property for a handsome $149,000,000. But last week the 25,000 underlier stockholders got $31,973,597 worth of bonds bearing 3% interest ($959,207 a year) and another 3% if it is earned. The underliers also got $12,300,000 of preferred stock.

By contrast common stockholders (the management sold its employes 64% of its own stock) got 719,926 snares of new common and a promise of a $1 "catchup" dividend, if earned. Their total original investment was about $43,000,000.

Thus Philadelphia's transit system finally emerged from behind the eight ball. The reorganization will save $5,800,000 in fixed charges each year--enough to boost 1935's $6,139,654 loss toward a 1940 profit. It will also free enough cash to get the company started on a 10-year, $22,000,000 modernization program to replace its lumbering trolley cars and sway-backed busses.

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