held common stock shall receive new common stock on a share for share basis. Of the 98,491 shares of preferred stock outstanding, only 141 shares are held by the public so that this involves an aggregate outlay of $12,712. The preferred stock of Transit is a noncallable 5% preferred stock with a par value of $50 per share and as of December 31, 1947 had arrears of $81.83-1/3 per share. The regular dividend is $2.50 per share or an aggregate of $246,228. It is noted that no dividends have been paid on the preferred stock since 1918. The record shows that the value of the preferred stock is less than the $90 per share offered to the public holders of such stock. Considering all the circumstances, however, including particularly the very small amounts in the hands of the public, there appears to be no substantial objection to the proposed payment from the standpoint of fairness to the other security holders of Transit. As we have heretofore shown, the present common stock is without substantial value. However, here again we do not think it necessary to prevent the proposed issuance of securities to the old common stockholders in view of the small amount of such stock publicly held. From the foregoing, it need hardly be stated that the proposed treatment of the publicly held stocks of Transit is fair and equitable to the holders of those securities. The plan provides that National will receive 545,610 shares of new common stock of a stated value of $2 per share for the 98,350 shares of preferred stock held by it and that National will surrender to Transit for cancellation its shares of the latter's common stock. On the basis of the record and the findings herein, we find the plan fair with respect to National. OTHER MATTERS The plan provides for the writing down of Transit's property to estimated historical cost and the setting up of reserves for the purpose of providing for abandonment and losses. The plan also provides that as of June 30, 1947, the date as of which it is proposed the reorganization takes place, Transit's entire earned surplus deficit will be eliminated. We see no reason for adverse findings with respect to the entries proposed and therefore conclude that the plan meets the applicable sections of the Act with respect to these transactions. As previously noted, our findings and opinion herein should not be construed as a final determination of the propriety of such entries, nor should it be construed as in any manner affecting the jurisdiction over Transit's accounts of the Pennsylvania Commission or such other regulatory authorities as may have jurisdiction over Transit in this respect. 31 The exact number of shares of 5% preferred stock held by National is 98,349.5654 and by the minority stockholders, 141.2406. For the purpose of convenience, the number of shares has been taken at the nearest full share. The plan provides that National will receive 545,610 shares of Transit's new common stock and that such common stock will be distributed to National's common stockholders as a step in compliance with our order of dissolution. Inasmuch as the record has not been fully developed with respect to the terms and conditions of the stock proposed to be issued by Transit, the manner of its issuance, and the distribution thereof, we shall reserve jurisdiction over the se matters, No estimate has been furnished us as to fees or expenses incurred or to be incurred in connection with the plan and therefore jurisdiction will be reserved with respect to these matters. We have been requested pursuant to Section 11 (e) of the Act to apply to an appropriate District Court of the United States in accordance with the provisions of Section 18 (f) to enforce and carry out the terms and provisions of the plan. Such request will be granted and application will be made to an appropriate Court to enforce and carry out the terms and conditions of the plan, provided it is modified to accord with the amendment suggested herein. The company has requested that the Commission make appropriate recitals in its order approving the plan for purposes of Supplement R and Section 1808 (f) of the Internal Revenue Code. The se recitals will be made in the order approving the plan as finally amended. CONCLUSIONS At the present time we shall enter no order. If within fifteen days from the date of this opinion (or such additional time as may be granted upon a proper showing) the plan is amended in the respects hereinbefore indicated, an order will be entered approving the plan. If within such time or such time is extended, no amendment is filed, we shall enter an order disapproving the plan. By the Commission. (Chairman Hanrahan and Commissioners McConnaughey, McEntire, and McDonald), Commissioner Rowen being absent and not participating. APPENDIX A LEHIGH VALLEY TRANSIT COMPANY AND SUBSIDIARIESa a Allentown Bridge Company and Norristown Transit Company are not included in consolidation. Does not reflect preferred dividend arrears as of December 31, 1947, amounting to $8,059,765 or $81.83 1/3 per share. Does not reflect preferred dividend arrears as of June 30, 1947, amounting to $7,936,652 or $80.58 1/3 per share. Reflects, for the purpose of illustration, the complete exchange of the Pennsylvania Power & Light Company preferred stock on the basis of a price of $112.50 per share. APPENDIX A--Continued LEHIGH VALLEY TRANSIT COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1947, Contribution by National of $2,912,750 par value of old common stock of $2,912,750 Issuance to National of $1,091,220 stated value of new common stock in 3,826,258 21,792 Charges- Excess over par value paid to acquire publicly-held preferred stock - - Transfer to earned surplus to eliminate earned surplus deficit existing after adjustments (5,649) (6,810,561) 55,410) Adjustment to restate street railway property at company's estimate of historical cost --- Provision for abandonment reserve (excluding $400,000 transferred from injuries and damages reserve) - · Credits- To reflect income tax refunds receivable and cancellation of accruals arising as a result of street railway abandonment program-Estimated book profit on exchange of Pa. Pr. & Lt. Co. preferred stock based on price of $112.50 per share Transfer from capital surplus to eliminate earned surplus deficit existing after adjustments- Net decrease in earned surplus- $(7,260,776) (5,431,803) 485,939 1,066,819 6,810,561 (4,329,260) |