Monkey Business

With 921 miles of beautifully straight track darting south from Chicago like a three-pronged serpent's tongue to St.

Louis, Evansville and the soft-coal fields around Cairo, Chicago & Eastern Illinois Ry. is more important than its size would indicate, for it is a connecting link in the great Van Sweringen system. To get control of C. & E. I. after ICC had disapproved linking it with the Chesapeake & Ohio, the Vans pulled off a slick deal in which Paine, Webber & Co. acted as dummy purchasers. A subsequent circumventing of legal requirements, whereby the Vans got RFC unwittingly to pay off an inter-company loan, drew an ICC examiner's admission that "we were made monkeys of. . . ." Last week ICC approved a reorganization plan for C. & E. I. that made monkeys of the late Van Sweringens' successors by slashing away nearly three-quarters of their 42.7% voting control.

Established in 1894, C. & E. I. went into receivership in 1913, was reorganized in the oldtime manner in 1920--i.e., left with a top-heavy capitalization. Although the road managed to make a puny net of some $400,000 a year during the booming 205, it began piling up deficits in 1930 ($7,000,000 that year).

In 1934 C. & E. I. took refuge under section 77 of the Bankruptcy Act. Steered by Chairman Kenneth David Steere, who as a partner of Paine, Webber & Co. handled many a market operation for the Vans, it presently submitted a reorganization plan which, while suggesting a substantial write-down of the common stock, nonetheless left C. & O. with an estimated 19.1% of voting power. Last week ICC cut this to 12.4% and, as it had lately done with Chicago Great Western and Western Pacific, rammed home the point that rail-road reorganization, new style, means completely wiping out the equity of common stockholders.

For C. & E. I. this reduced the capitalization from $80,500,000 to $61,000,000 and fixed interest charges from $1,700,000 to $505,000. As usual, ICCommissioner Charles D. Mahaffie dissented on the ground that this was not drastic enough.

But C. & E. I. Chairman Steere, no longer with Paine, Webber, was "tickled to death it went through."

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