Freeze Out

In Chicago's Federal Court a month ago, Judge Michael L. Igoe handed down an apparently routine decision: he approved the reorganization of the Chicago, Milwaukee, St. Paul & Pacific Railroad Co., on the rocks since 1925. But it was not routine to 1,175 holders of the road's preferred stock.

Last week they asked the court to keep jurisdiction over the road's properties. Their reason: the reorganization would freeze out the 1,193,073 shares of preferred stock (par value: $119,307,300). The stockholders alleged that the Milwaukee Co., during the last seven years, had had annual average earnings before fixed charges of $25,963,740, while fixed charges were at a yearly average of only $23,481,841. The profits only started with the five-year wartime traffic boom which pulled many another U.S. railroad out of the red.

The stockholders hoped that the Reed bill, introduced in Congress on Nov. 23, would add weight to their petition. Under its terms a bankrupt railroad whose average earnings for seven years have covered its fixed charges can be taken out of the courts, handed back to its stockholders. The Milwaukee's stockholders hoped to stave off approval of the reorganization until they had a chance of preserving their investment.

With this chance in mind, one of the bill's sponsors, Representative Chauncey W. Reed of Illinois, had asked Judge Igoe in mid-November to postpone the Milwaukee decision. Judge Igoe's statements to the press indicated that he was considering Reed's proposal, but he issued the final order as scheduled.

The Transportation Association of America was as indignant as the stockholders. Congress, said the Association, should "inquire searchingly [into] a state of affairs . . . hardly conducive to public confidence."

Replied Judge Igoe: "The reorganization followed a regularly planned schedule. Why, it would have cost anywhere from $50,000 to $200,000 to have put the decision off. If we had waited until action was taken on the bill, this road might be in receivership another ten years."

This file is automatically generated by a robot program, so reader's discretion is required.