New Hope in MOP

To millions of U.S. security holders in receivership railroads last week came important news: a new and comforting reorganization plan for giant Missouri Pacific Railroad (in bankruptcy since 1933) will soon be announced. When & if the new plan goes through, it may start a chain of revisions in other reorganization schemes, give an unexpected break to their stock and bondholders.

Worked out as a compromise between the claims of the senior bondholders and the loud squawks of the junior holders, the new MOP plan is a thorough rehash of the ICC plan issued three years ago. First & foremost it allows for the snappy rise in MOP earnings since 1938, would use cash to pay off more than $50,000,000 top-ranking bonds (the ICC plan would distribute $2,700,000 cash). This fat payoff permits the new plan to give a much better deal to junior security holders and at the same time stay within the framework erected by ICC--a 17% cut in capitalization to $560,000,000, a 40% slash in all interest charges to about $15,000,000 annually. Other details:

> Instead of zero, preferred and common stockholders will get warrants to purchase new stock at a "reasonable" price.

> Instead of a fractional payoff, all junior bonds will get a dollar-for-dollar exchange in new bonds or stock.

Promoter of this deft plan is scrappy, flash-quick Robert Ralph Young (TIME, Dec. 28), whose rambling Alleghany Corp. owns 60% of MOP common and $11,000,000 in 5 1/2% convertible bonds. Usually a rooter for rail debt reduction, Bob Young boiled over when he first saw the ICC plan: Alleghany's huge holdings in MOP common were tossed out entirely, its 5 1/2% bonds were treated almost as badly. When he took another look he got madder still: the big insurance companies (holding the topflight bonds) would control the road.

So Bob Young set out to defeat the ICC plan and thus save his own hide. Campaigner Young's battle cry: the plan is based on the "Dust Bowl" earnings of 1933--it must be changed. Charged tough, senior Bondholder Spokesman John Weiss Stedman: the-arguments are wholly fallacious . . . the proposals "are a tax-avoidance scheme."

First break for Bob Young came when MOP security holders voted on the ICC plan and more than one-third of them turned it down. Meanwhile Young proposed four MOP directors and saw them elected. Then he convinced potent Massachusetts Investors Trust and some of the smaller insurance companies that his plan was best. Lastly he got the unexpected help of the war boom. MOP's net available for dividends soared from a loss of $9,564,000 in 1940 to a record $30,600,000 in 1942. Meanwhile, the once-rickety road was put in tiptop condition, with a whopping $480,000,000 spent for new equipment, repairs and maintenance in 1933-42.

Biggest criticism of Bob Young's plan is that too much reliance may have been placed on present high-tide war earnings. If MOP profits fall drastically in peacetime, the road may find itself in worse shape than if the ICC plan had been followed to the letter. But this week Wall Streeters figured the Young plan was going through--in heavy trading the junior bonds hit $80 each v. last year's low of $7.50.

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