after of the New York Central System, which the Board of Directors of The New York Central and Hudson River Railroad Company, or its successors, may determine to include in such consolidation with it, and also hereby consents to and approves of the consolidation of The Michigan Central Railroad Company with any other railroad company or companies now or hereafter of the New York Central System, such consolidation or consolidations being made upon such terms and conditions as the Boards of Directors and the stockholders of said companies, acting pursuant to law, may fix, and the particular terms and conditions hereinafter mentioned; this consent being applicable either to a single consolidation or to successive consolidations which may be effected by consolidation proceedings or by merger under present or future laws, or by purchase or otherwise. The consent and approval hereby given are, however, on the particular terms and conditions that, prior to any such consolidation, The New York Central and Hudson River Railroad Company's Three and One-Half Per cent. Gold Bonds, Michigan Central Collateral, and The New York Central and Hudson River Railroad Company's Three and One-Half Per Cent. Gold Bonds, Lake Shore Collateral, shall have been secured by a mortgage to be executed by The New York Central and Hudson River Railroad Company upon the railroad owned by it at the date hereof, which mortgage shall be next in rank and second only to the existing general mortgage of The New York Central and Hudson River Railroad Company, dated June 1, 1897, securing an authorized issue of $100,000,000 of bonds; and that the Railroad Company shall have paid the tax on the Michigan Central collateral bonds under the present mortgage tax law of the State of New York; and that in connection with any consolidation with the New York Central no lien or charge upon the property of The Michigan Central Railroad Company shall be created or incurred except in subordination and subjection to the prior claim, lien and charge of the Michigan Central collateral bonds. and known to me to be the same person described in and who executed the foregoing instrument, and he duly acknowledged to me that he executed the same. Notary Public, the corporation duly sworn, did depose and say: that he resided which executed the foregoing instrument; that he knew the seal of said corporation; that the seal affixed to said instrument was such corporate seal; that it was so affixed by order of the Board of as such of said corporation, and that he signed his name thereto by like order. Notary Public, 191 . The undersigned hereby certifies that, at the date hereof, had on deposit with it of THE NEW YORK CENTRAL AND HUDSON RIVER RAILROAD COMPANY'S THREE AND ONE-HALF PER CENT. COUPON GOLD BONDS, MICHIGAN CENTRAL COLLATERAL, dated April 13, 1898, each of the par value of $1,000, numbered PURPOSE AND METHOD OF CONSOLIDATION1 REPORT OF THE COMMISSION TO THE SENATE OF THE UNITED STATES. BY THE COMMISSION: The Interstate Commerce Commission has the honor to report the result of its investigation, conducted pursuant to the resolution of the Senate of July 10, 1913, reading as follows: Resolved, That the Interstate Commerce Commission be instructed to investigate, if it has not the information now in hand, and report to the Senate, all the facts and circumstances connected with the proposed issue by the New York Central & Hudson River Railway, of 4 per cent. mortgage bonds for $167,102,400, for the purpose of taking up outstanding 32 per cent. bonds now existing against said railroad and the stock of the Lake Shore and Michigan Central Railways. That the Commission be instructed to furnish the Senate with the date and amount of all said 31⁄2 per cent. mortgage bonds, the reason for their issue, when they mature, whether the issuing of the said 4 per cent. bonds for the said 31⁄2 per cent. bonds will not be an unwarranted and illegal capitalization of said railroads, whether the proposed consolidation of said railroads involved in the said proposed issue of 4 per cent. bonds would not be unwarranted and unlawful, and whether the increase of the rate of interest thus proposed by the issuing of said 4 per cent. bonds is necessary, even though the consolidation of said railroads is unobjectionable. The New York Central & Hudson River Railroad Company will be referred to in this report as the New York Central, the Lake Shore & Michigan Southern Railway Company as the Lake Shore, and the Michigan Central Railway Company as the Michigan Central. The $167,102,400 of bonds referred to in the Senate resolution constitute the total of the New York Central's Lake Shore collateral bonds for $90,578,400, issued in 1898, to mature in 100 years, in payment for about 90 per cent. of the stock of the Lake Shore at $200 a share; its Michigan Central collateral bonds for $19,336,000, issued in 1898, to mature in 100 years, in payment for about 90 per cent. of the stock of the Michigan Central at $114 a share; its debenture bonds for $48,000,000, issued in 1904, to mature in 30 years; and its debenture bonds for $9,188,000, issued in 1912, to mature in 30 years. 1 Interstate Commerce Commission. No. 5960. In the matter of a proposed Bond Issue by the New York Central & Hudson River Railroad Company. April 13, 1914. By direction of Senate resolution the Commission reports to the Senate the facts, and its opinions on certain questions raised thereby, in connection with the New York Central & Hudson River Railroad Company's proposal to consolidate with that company the Lake Shore & Michigan Southern Railway Company and certain of its owned or controlled lines, and to refund $90,578,400 of the New York Central Company's Lake Shore collateral 32 per cent bonds with the consolidated company's 4 per cent mortgage bonds in consideration for the consent of these bondholders to the consolidation. The Lake Shore and Michigan Central collateral bonds bear interest at 3 per cent., the debenture bonds at 4 per cent. The par value of the stock purchased as above shown is $100 a share. The Lake Shore collateral bonds are secured by pledge of the Lake Shore stock, and the Michigan Central collateral bonds by pledge of the Michigan Central stock, for which they were issued in payment. None of the bonds mentioned, collateral or debenture, is secured by mortgage, but as to all of them the New York Central is bound by covenant contained in the respective indentures under which they were issued to secure them in any future mortgage which it may place upon its property. The New York Central is also bound by the further covenants not to consolidate the Lake Shore with the New York Central without first obtaining the written consent thereto from the holders of threefourths of the Lake Shore collateral bonds, and not to vote the stock of the Lake Shore in favor of any increase in the Lake Shore's capital stock, which is $50,000,000. Similar covenants in the two respects last noted are contained in the indenture under which the New York Central's Michigan Central collateral bonds were issued. The New York Central extends from New York to Buffalo and the Lake Shore from Buffalo to Chicago. The New York Central now desires to consolidate the Lake Shore with the New York Central, not only in the interest of the through traffic of the two companies between New York and Chicago, but more particularly in the interest of simplicity and strength in the financing of the two companies. The Lake Shore owns all of the stock of the Toledo & Ohio Central Railway Company; of the Chicago, Indiana & Southern Railroad Company; and of the Jamestown, Franklin & Clearfield Railroad Company; and a trifle more than 50 per cent. of the stock of the Pittsburgh & Lake Erie Railroad Company, and of the New York, Chicago & St. Louis Railroad Company. The New York Central intends to include all of these companies so owned or controlled by the Lake Shore, together with certain of their subsidiaries, in the consolidation, except the New York, Chicago & St. Louis Railroad Company. The capital stock and bonded debt of the principal companies which the New York Central proposes to consolidate are as follows: Company Stock Bonds New York Central & Hudson River R. R. Co.. $225,581,100 $291,211,400 Included in the $291,211,400 of the New York Central's bonds shown in the above table are the $167,102,400 of bonds referred to in the Senate resolution. The New York Central states that the proportion of bonds to stock of the Lake Shore approaches closely the limit of separate and economic financing of that property, and that the situation as to the Lake Shore is further complicated by the restriction mentioned with respect to any future increase in its capital stock. The New York Central proposes to provide for the issuance, following the consolidation of bonds secured by mortgage on the combined properties, to be available for refunding the present bonded debt of the two companies and for additional future capital needs of the consolidated company so far as those needs are to be met by the sale of bonds. It represents that such a simplified series of bonds, each of equal lien, would find readier confidence with the investing public than would the separate issues of the two companies, each subject to previous issues of prior lien, and that they would soon become established in the market as the consolidated company's standard bonds. The issue of $167,102,400 of bonds referred to in the Senate resolution is but a step in this general plan of future financing of the two properties. The New York Central proposes to secure those bonds by mortgage on the property of the New York Central, and, following the consolidation, by mortgage on the property also of the Lake Shore, under what the New York Central designates its consolidation mortgage. It has been explained that the New York Central is bound by covenant of indenture to secure by mortgage its Lake Shore collateral bonds, its Michigan Central collateral bonds, and its debenture bonds of 1904 and of 1912 before it may place other mortgages on its property, and it is to carry out this promise that it proposes to execute the consolidation mortgage. This mortgage restricts the issuance of bonds thereunder to the exact amount of these collateral and debenture bonds; that is, to the total of the $167,102,400 referred to in the Senate resolution, and provides that the New York Central may, following the consolidation, issue 4 per cent. bonds thereunder in exchange for all or any part of those bonds. The final bond which the New York Central contemplates as its standard consolidated company security it proposes to authorize and secure by another mortgage, which it terms its general refunding and improvement mortgage. This mortgage authorizes the issuance of bonds sufficient in amount to refund all prior indebtedness of the consolidated company, including the consolidation mortgage bonds, and to provide for such future bonds as may from time to time be required for the consolidated system. Its only restriction is that there shall at no time be out |