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Re: [FJGRailroad] Re: NYC Interest In The FJ&G

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  • joseph Klapkowski
    Since this is my area let me let you in on a few facts of finance....If i am financing an operation and I think my loan is underwater, part of the way out is
    Message 1 of 5 , Nov 30, 2003
      Since this is my area let me let you in on a few facts of finance....If i am
      financing an operation and I think my loan is underwater, part of the way
      out is often a sale of assets. However i would be hard pressed under the
      consolidated refunding mortgage to think of a lender on the planet who would
      be willing to face economic reality and let go of a piece that was
      contributing to debt service. To do so requires that a lender admit that
      they have a hole and they never want to admit that.

      In this case I am talking about a single institution but where the bonds may
      be held by a diverse group of interests the likelyhood that the group will
      ever reach a consensus is limited at best.

      This all assumes that we have the kind of reporting that makes it clear
      where the problems lie. Despite our difficulties in the world of finance
      today (enron etcc) the clarity of reporting (if it s accurate) is far
      different than 80 years ago. I suspect that in those days the companies
      were being tossed about as good investments more ont eh basis of emotion
      than fact.............. just my two cents

      >From: "paul larner" <pklarner@...>
      >Reply-To: FJGRailroad@yahoogroups.com
      >To: FJGRailroad@yahoogroups.com
      >Subject: Re: [FJGRailroad] Re: NYC Interest In The FJ&G
      >Date: Sat, 29 Nov 2003 00:26:02 -0500
      >By the late teens the handwriting was on the wall: the railroad had over
      >extended itself on the building of the extension to Amsterdam and
      >consolidation with the ASTRy with assumption of its debt. It would't be
      >long before it couldn't pay the interest on it's debt much less even
      >consideration of amortization. The NYC bid for consolidation of its
      >properties in the mid-west with the main system was one option seen to get
      >out from under, however the mortgage of 1903, issued to cover the cost and
      >anticipated costs of the extensions and acquisition of the Amsterdam Street
      >Railway consolidated all the existing mortgages into one big pot. ALL the
      >assets of the company were put up to secure the note. This made it
      >to break out what portion of the debt belonged to the steam road and what
      >was the electric. Part of the resolution could have been deduced from the
      >results of the valuation, though at this time I can't quickly state the
      >percents for each division and it relation to the outstanding debt. I have
      >come to belileve that in the 1870's as now passengere service was not
      >what made the money for the railroads, at least not the FJ&G. I would
      >conclude with the obvious hindsight of 100 plus years that had the company
      >let the horse line then the trolleys take the passenger traffic south of
      >Gloversville they would have always made money and had little or no debt by
      >the end of the twenties. Yes the trolleys paid for a few years. Hees made
      >the same mistake Mellen did with the New Haven. He wanted to control every
      >possible competition and as a result financially killed the company.
      >Heacock and company took the same approach in 1874 but at their time the
      >ability Hees had to envision the effect automobiles and trucks would have
      >individual travel and their company's revenue didn't exist.
      >Considering the electric division was costing more than it made, thus being
      >subsidized by the freight between Fonda and Gloversville (note Northville
      >and Broadalbin extensions didn't pay the bills either). A lease of
      >didn't come close to covering the interest of 7% nor could 1.4 million even
      >be considered as a purchase price though probably fair. It would leave
      >exceeding the ability of the electric line pay.
      >I could make a case (and may) that greed was the demise of the second
      >company. Ego may have had its part too, as JLH's brother in law Colvin,
      >involved in the Hudson Valley and other electric lines and power companies.
      >The comsolidation hearings of the NYC allowed the U&D among other marginal
      >operations to fold into the NYC, thereby protecting what commerce and
      >interest they served for several more years.
      >The company had another ace up its sleeve, or so it hoped, in the form a
      >government loan. After mustering as much support as the company could, the
      >loan was denied in 1932 forcing the company to default on its debt and seek
      >court protection. The courts did not want JLH to be the trustee. The
      >details I can't fully explain here, but it was agreed to have a joint
      >trusteeship with a court appointed receiver (likely to keep an eye on JLH.)
      >It will be part of a good story, whenever I get time to restart writing.
      >Another topic though railroad related - re: the book "when the railroad
      >leaves town" which covers the FJ&G in it pages - Am I correct the author's
      >premise is that after the railroads leave its' community goes into a
      >decline? I gathered this thought from a promo I had seen for the book but
      >have neglected to buy it because I think that premise, if true forthe book,
      >is not correct. Has any one read the book and is it worth the money?
      >I keep going back and expanding what I wrote to fill in more details - a
      >was happening during the twenties not only on the FJ&G but throughout the
      >country. The FJ&G was just a bit player even though it is large in my life
      >and hopefully yours. This would be a lot of pages to bring it all together
      >for you now.
      > >From: "Walt Danylak" <waltdanylak@...>
      > >Reply-To: FJGRailroad@yahoogroups.com
      > >To: FJGRailroad@yahoogroups.com
      > >Subject: [FJGRailroad] Re: NYC Interest In The FJ&G
      > >Date: Sat, 29 Nov 2003 03:48:39 -0000
      > >
      > >--- In FJGRailroad@yahoogroups.com, "waltdanylak@c..."
      > ><waltdanylak@c...> wrote:
      > >One of the many stories regarding the FJ&G states that the NYC was
      > >interested in purchasing the Steam Division. NOT! Read the following
      > >attachment taken from FJ&G Annual Reports. The FJ&G started the whole
      > >affair. I don't believe the NYC had any interest in the FJ&G.
      > >
      > >Walt
      > >
      > >I guess Yahoo has changed or something, I can't seem to send a
      > >message with an attachment, so I'll add it to message.
      > >
      > >Walt
      > >
      > >1928 ANNUAL REPORT
      > >
      > >In the latter part of July 1926, the NYCRR Co. applied to the ICC for
      > >authority to acquire control of the railroad systems of the
      > >Cleveland, Cincinnati, Chicago and St. Louis Railway Co., the
      > >Michigan Central Railroad Co. and the Chicago, Kalamazoo and Saginaw
      > >Railway Co., under leases for the term of 99 years. In view of the
      > >fact that this Company's lines connect only with the lines of the
      > >NYCRR Co., and that, therefore, any plan for the ultimate
      > >consolidation of the railway properties of the United States into a
      > >limited number of systems, as provided in the Transportation Act of
      > >1920, must contemplate the consolidation of this Company's lines with
      > >those of the NYCRR Co., it was deemed advisable for this Company to
      > >intervene in the proceeding and to present the pertinent facts to the
      > >ICC for such action as it should deem proper under the circumstances,
      > >which was accordingly done. A number of other connecting short lines
      > >also intervened for the same purpose. A hearing upon the application
      > >was held in January 1927, and after the filing of briefs a proposed
      > >report was submitted to the ICC by one of the Examiners in charge of
      > >the hearing, in which the dismissal of the application was
      > >recommended, because of its failure to provide for the inclusion of
      > >the connecting short lines. Thereafter the case was reopened upon
      > >motion of the NYC to permit it to introduce evidence regarding
      > >connecting short lines, which it had not done at the original
      > >hearing, where it relied solely upon its objection to the evidence of
      > >intervening short lines on the ground that it was not relevant to the
      > >matter before the ICC. A second hearing was thereupon held in January
      > >1928, at which the information originally supplied by this Company
      > >was brought down to date and the NYC also introduced evidence
      > >concerning the properties of this Company and the other connecting
      > >short lines. Briefs were again filed and oral argument heard by the
      > >ICC, which, under date of January 14, 1929, made its report which was
      > >to the effect that the authority requested by the NYC should be
      > >granted, on condition, however, that before the proposed leases
      > >became effective the NYC should offer to acquire the steam railroads
      > >of the FJ&G and the properties of certain other intervening short
      > >lines, for considerations equal to the commercial value of the same
      > >as determined by agreement between the parties or by arbitration.
      > >Preliminary negotiations on the basis of the ICC's report were
      > >undertaken with the NYC, but it was found that no satisfactory basis
      > >could be arrived at for separating the electric railroads from the
      > >steam railroads of this Company. As the question of the
      > >practicability and propriety of such separation never had actually
      > >been in issue in the hearings before the ICC, application was
      > >thereupon made for the reopening of the proceeding so that this
      > >question could be properly presented and argued, with the end in view
      > >of amending the condition imposed on the NYC so as to require it to
      > >make an offer to acquire all of the railroads, both steam and
      > >electric, of this Company. The ICC, however, refused to reopen the
      > >proceedings, and, unless it grants relief in some other way, this
      > >probably terminates the matter so far as this Company is concerned.
      > >
      > >1930 ANNUAL REPORT
      > >
      > >Our 1928 Report contained a full account of the intervention of this
      > >Company in the NYC Unification proceedings before the ICC, and the
      > >unsatisfactory outcome of the same down to May 1929. In approving the
      > >unification, the ICC had required the NYC to offer to acquire only
      > >the steam (and not the electric) railroads of this Company for a
      > >consideration equal to the commercial value thereof, as determined by
      > >agreement or by arbitration. The best offers which could be obtained
      > >from the NYC, after long negotiations, were $1,400,000 to purchase
      > >the steam railroad of this Company, free and clear from all liens and
      > >encumbrances, or a long term lease of the same at an annual rental of
      > >$100,000. These amounts were hopelessly inadequate; arbitration
      > >proceedings to determine a fair price or rental would be very long
      > >and expensive, with no certainty that the terms fixed would be
      > >satisfactory; and, besides, there were many serious, if not
      > >insurmountable, legal and practical difficulties to be overcome
      > >before the steam lines could be separated from the electric lines,
      > >even if a satisfactory price or rental could be obtained. It was,
      > >therefore, deemed advisable to negotiate with the NYC along quite
      > >different lines, in an endeavor to obtain a more equitable adjustment
      > >of freight rates, freight and passenger divisions and charges for use
      > >of joint facilities at Fonda, which would increase the income of this
      > >Company to a point where it could continue to operate as an
      > >independent railroad. As a result of many months of negotiations
      > >between the officials and counsel of the two companies, two contracts
      > >were agreed upon which it was believed would bring about this result
      > >under normal business conditions. The more important of these, that
      > >covering the adjustment of rates and divisions, is given in full as
      > >an appendix to this Report. The other simply provides for a flat
      > >annual rental of $5,000 for the use of joint facilities at Fonda,
      > >which is a very substantial reduction from that heretofore paid.
      > >These agreements were formally submitted to the ICC for its approval,
      > >and, in consideration of the making of the same, this Company
      > >withdrew its intervention in the NYC Unification proceedings.
      > >Although these contracts were, in some respects, retroactive to April
      > >1, 1930, the full effect of the same will not be realized until they
      > >have been in operation in all respects for a full year under more
      > >normal business conditions than now exist.
      > >
      > >
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