RAILROADS: Battle for MoPac

Of all the major railroads that went broke during the Depression, the Missouri Pacific is still the only one in bankruptcy, despite the fact that it is fat with profits. What's wrong? The trouble is that holders of $223 million worth of top-claim MoPac bonds and holders of 828,395 shares of its common stock cannot agree on who should control the road after reorganization. At stake is a rich prize. MoPac has 10,000 miles of track tapping the Midwest and Southwest, $104 million in the till, and what looks like a bright future ahead.

No one has fought harder to grasp this prize than Railroad Juggler Robert R. Young, who owns 51% of MoPac's outstanding common stock. For two years he has opposed a plan, tentatively approved by the Interstate Commerce Commission, which would wipe out the common-stock interests, give control of the reorganized road to the bondholders. Last week the fight erupted in a rash of full-page ads across the nation and a flurry of charges and countercharges at an ICC hearing.

The big question before ICC was: Have MoPac's earnings improved enough to warrant a change in ICC's reorganization plan and give common stockholders a cut of the pie?

Dim Future? In ICC's Washington hearing room, Paul J. Neff, MoPac president and chief operating man for the road's court-appointed trustee, took the stand to answer the question. His answer: no. MoPac's net profit, he agreed, had hit $22 million last year, but this year it would be closer to $13 million. It would drop still more in the future, said Neff, as the business boom tapers off and Korean war shipments decline. As President Neff's damaging testimony continued, Bob Young held whispered conferences in the back of the hearing room with his longtime friend, MoPac Chairman T. C. Davis. When Neff stepped down from the stand, Young and Davis called a press conference. President Neff, they said, had just been fired.

Actually, all Neff lost was a title. He will stay on as operating boss of MoPac at $75,000 a year, under Guy A. Thompson, the 76-year-old St. Louis lawyer, Democratic politico and court-appointed trustee for the road. As majority stockholder, Young can pick a president. But it is an empty title. The real bosses are Trustee Thompson and his man Neff. Nevertheless, the dramatic move set the stage nicely for Young when he took the witness stand to fire back.

Five-Year Plan. True to form, Young charged, in ads and in his testimony, that a bunch of "bankers" were out to take over MoPac to cash in on rich banking & insurance business with the road. In this case, the bankers were operating through a "New York Financial Group" of insurance companies, led by Metropolitan Life. The insurance companies, said Young, held only $20 million worth of MoPac bonds. Young's own cash investment is small; he acquired his MoPac stock when he and some friends bought Allegheny Corp. for $4,000,000. If the "New York Financial Group" has its way, said Young, and the ICC plan is accepted, holders of bonds worth $1,445 apiece would get only $158 in cash, $722 in fixed-interest bonds, and the rest in bonds bearing interest only if it is earned. Common stockholders would get nothing. Thompson, Young added, was siding with the bankers to put through this plan. This Thompson denied.