R. R. Surgery

When portly O. P. Van Sweringen finally bought control of Missouri Pacific R. R. for his top-heavy Alleghany Corp. in 1930 he was tickled pink. The word that more than 50% of MOP stock was his reached him in the office of J. P. Morgan & Co. Beaming all over, O. P. dashed out of the place and around the corner to Kuhn, Loeb & Co. to tell MOP's bankers he was the new boss.

But the promise of MOP as a money-maker was as hollow as 1930's promise of a chicken in every pot. Three years later MOP was in the hands of a trustee in bankruptcy. Long before O. P. died he would have been glad to get back the $70,000,000 he spent buying into the No. 3 U. S. railroad (by mileage). Last month Alleghany Corp. (now controlled by Glass-Jar Tycoon George Alexander Ball) sold out 150,000 shares of O. P.'s preferred stock to establish a tax loss. They had cost an average of $104 a share. They sold at auction for less than 21-c-.

Last week, after six years' inspection of every scantling and joist of MOP's overbalanced capital structure, the Interstate Commerce Commission issued its plan of reorganization. For holders of common and preferred stock with a stated value of $152,000,000, the bad news was set down on Page 2 of a 280-page report: "The equities of the holders ... are found to have no value and the holders of those stocks are given no participation in the allotment of securities of the new company."

Cold as a surgeon's amputation was ICC's plan, which needs only the approval of the Federal Court at St. Louis to become effective. Under the management of Trustee Guy Atwood Thompson, onetime American Bar Association president, MOP has turned in a net operating income of between five and eleven millions a year. ICC whittled down fixed interest charges to fit, from $24,770,052 to $7,286,804. The capitalization of the system was chopped down from $671,205,664 to $560,478,900.

Best to fare in reorganization are the holders of $13,715,000 in equipment trust certificates whose loans went to keep MOP in first-class operating condition. They will be paid dollar for dollar. RFC, which lent MOP $23,134,800 to keep above water, and now has an additional $8,630,000 interest claim, gets $25,994,000 in bonds, the balance in cash and preferred stock. Holders of senior bonds get niggling amounts of cash, trade in the balance of their bonds for new MOP's prime security, ten-year collateral trust notes. Some junior bonds get new bonds and stock, some only common stock.

The new common and preferred stock is parceled out among former bondholders and other creditors, and will take a lot of combining and buying before any group can establish such control as Alleghany Corp. once had. Among the new stockholders ordered by ICC to change part of their loan money into risk money (in addition to RFC) : Metropolitan Life (present bond holdings: $20,627,000), Prudential ($19,761,000), Northwestern Mutual ($12,602,000), New York Life ($11,845,000), Equitable Life ($8,942,000), a J. P. Morgan & Co. syndicate (loans plus interest, $8,114,212).

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