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IN RE NEW YORK

July 11, 1951

In re NEW YORK, SUSQUEHANNA & WESTERN R. CO.


The opinion of the court was delivered by: SMITH

This proceeding has for its object the reorganization of a railroad corporation, hereinafter identified as the Debtor, under Section 77 of the Bankruptcy Act, as amended, 11 U.S.C.A. § 205. The original plan of reorganization which had been approved by the Interstate Commerce Commission and certified to this court, pursuant to the provisions of the said Act, was referred back to the Commission for reconsideration on June 12, 1950. (See Order No. 427 entered June 12, 1950). The reasons which prompted this action by the court are fully discussed in an opinion which was filed on June 7, 1950; further discussion of these reasons seems unnecessary.

The proceedings were reopened by the Commission and a further hearing was held for the purpose of 'receiving (a) evidence relating to modification of the plan, (b) evidence essential to bring the record of the Debtor's operations up to date, and to assist in reconsideration of the plan, and (c) any other evidence pertinent to the reconsideration of the plan or the development of a new plan.' Thereafter the original plan of reorganization was modified and, as modified, approved by the Commission. The modified plan of reorganization was certified to the court pursuant to subdivision d of section 77 of the Act, and is now before the court for approval. The approval of the Plan of Reorganization is recommended and urged by counsel appearing on behalf if the interested parties affected by the plan. The only objection is that of Miss Edith A. Merritt, who as of this date holds but two 'General Mortgage Bonds.'

 Capitalization

 The original plan of reorganization, as proposed by its proponents, was predicated upon a proposed capitalization of $ 16,250,000, exclusive of equipment obligations in the approximate amount of $ 452,000. This proposed capitalization was adjusted downward after hearings on the plan and hearings on the several petitions for a modification of the capital structure. The present Plan of Reorganization proposes a total capitalization of $ 15,500,000, exclusive of equipment obligations. There are no objections at this time to the proposed capitalization, and we therefore see no reason to discuss it at length.

 The proposed capitalization of the Debtor, as ultimately modified by the Commission, includes the following items:

 Equipment Obligations . . . $ 452,844.

 Terminal First Mortgage Bonds . . . 2,000,000.

 First and Consolidated Mortgage Bonds . . . 3,000,000.

 General Mortgage Income Bonds . . . 4,000,000.

 Preferred Stock . . . 3,000,000.

 Common Stock (No par value) . . . 3,500,000.

 Total . . . $ 15,952,844.

 It should be noted that the Commission originally approved a proposed capitalization of $ 14,000,000, exclusive of equipment obligations. An increase of $ 1,500,000 was approved by the Commission after hearings on the several petitions for modification. The increase is primarily reflected in the more equitable treatment accorded the holders of General Mortgage Bonds.

 We have examined the proposed capital structure of the Debtor in the light of the principles enunciated by the Supreme Court in the case of Ecker v. Western Pacific Railroad Corp., 318 U.S. 448, 63 S.T. 692, 87 L. Ed. 892. An examination of the record discloses that the proposed capitalization was established by the Commission after a careful study and appraisal of many factors, to wit, the physical condition and value of the properties, the present and prospective earning power, the present and prospective tariff revenues, maintenance costs, the economic and physical value of improvements made by the Debtor during these proceedings, and the economic conditions which will contribute to the feasibility of the plan of reorganization.

 It appears from the evidence that the probable earning power of the Debtor, properly evaluated, is adequate to support the proposed capitalization. There appears to be no reason to summarize the evidence because a detailed summary is embodied in the several reports of the Commission, particularly the Report of July 19, 1944, and the Supplemental Reports of March 5, 1945 and March 12, 1951. We have examined these reports and we find that the summaries therein contained are supported by the evidence. It is out opinion that the proposed capitalization is adequately supported by the evidence, is in accordance with legal standards, and is compatible with the public interest.

 Treatment of Existing Securities

 Present Mortgages and ...


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