Western Moratorium

Western Mortorium

Arthur Curtiss James, owner of more railroad stocks than any man in the U. S., controls only one major road--Western Pacific. While Western Pacific was pleading for a $1.000,000 loan from RFC last summer, it was revealed that Mr. James owned 352,000 of its 574.000 common shares. Western Pacific did not get that particular loan because it had already pledged all its available collateral, but it did manage to meet the interest on its first mortgage bonds due Sept. 1. Last week the due date came & went again but Western Pacific did not pay.

Instead, the road asked its bondholders for a one-year moratorium. All interest due this year would be paid in a lump sum in 1937. The junior creditors have already agreed to a moratorium provided holders of 75% of the first mortgage bonds also waive their claims. In a joint statement Chairman Thomas Milton Schumacher and President Charles Elsey held forth this hope: "The traffic of the railroad has shown progressive improvement for the past six months, and the management believes that if the holders of the funded debt cooperate . . . the company will be able to meet its other obligations and no judicial reorganizations . . . will be necessary."

Western Pacific's plans for avoiding a bankruptcy reorganization were aided by the fact that its creditors were not the usual army of anonymous bondholders. The first mortgage bonds are substantially its entire funded debt and one-half of them are owned by a few big insurance companies like Metropolitan Life ($6,852,000), Prudential ($3,000,000), New York Life ($1.300.000). Its junior creditors are not junior bondholders but the RFC ($3,000,000). Railroad Credit Corp. ($1,300,000) and Western Pacific RR Corp. ($5,600.000).

Western Pacific has not earned its fixed charges for three years. Given a year's time, however, Proprietor James thinks he can pull it through alive. The 200-mile link he built in California to connect Western Pacific with Great Northern, completed in 1931, has not yet revealed its full traffic possibilities. The Dotsero cutoff west of Denver, to be finished this year, is expected to direct transcontinental traffic to the Denver & Rio Grande-Western Pacific route (TIME, Feb. 12).

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