RAILROADS: Battle for MoPac

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Then Young advanced his own plan for MoPac. It would give him control, by cutting in common stockholders, but he insisted it would also give bondholders a better deal too. He would give each bondholder $445 in cash and a $1,000 bond with a fixed annual interest rate. There was a rub to Young's plan; the bondholders might have to wait a while before they got their cash. While paying them off with some of the $104 million in MoPac's till, Young would use most of the road's cash to improve MoPac's financial condition.

He would buy up bonds and retire them, thus improving the road's credit so that he could refinance all MoPac's bonds at a lower interest rate, cut carrying charges. Said Young: "Within five years all of its bonds would be selling on the low interest basis, and its preferred stock would be making marked progress in the payment of accumulated dividends, and the common stock [now traded over the counter at around $5] would be selling from $50 to $100 a share." Young said he had done it before. In the case of the Nickel Plate Railroad he took over when its first-mortgage bonds were selling below 30, its common stock at $7. Nickel Plate bonds which replaced the old issue are now around 90, its common stock had sold above $200 before it was split 5 for 1. With MoPac, said Young, he could "make clover" in the same way.

Insurers' Insurance. Young may have been somewhat over-optimistic about what he could do for MoPac, but he did have one strong point. Ex-President Neff's profit figure of $13 million in 1951 was misleading, said Young. It gave the impression that the road had a comparatively small margin over its fixed charges. Actually, said Young, MoPac's gross of almost $60 million (equal to four times the interest on its top bonds) was the real indication of the road's earning power.

Up till last week, Young had not seemed to be making much headway in his battle for the road. In the last vote on ICC's plan, the bondholders had heavily opposed him, were skeptical of his promises. But last week, there were signs of a shift. Word spread that MoPac bondholders had started buying MoPac common stock, just in case Young should win.