SECURITIES: Mail from the Great Northern

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The day's mailbag was eagerly emptied by partners and officers of the principal underwriting houses in New York and Chicago last week. Each firm was expecting a letter from Frank J. Gavin, president of the Great Northern Railway. Most of Railroader Gavin's letters are notably brief, but this one was to be a little longer than usual. It was an invitation for competitive bids on $100 million 3½% refunding bonds of the Great Northern—the largest issue of topflight railroad bonds to come to market since 1900. The sale must be completed by Oct. 15.

In general, investment bankers do not like competitive bidding for securities, although it is required on railroad securities by the ICC decision of May 8, 1944. They prefer the comfortable, traditional, negotiated transaction between client and banker. And Great Northern's offering is just twice as large as the $50 million total which bankers generally believe is the top amount practicable under competitive bidding. To handle the Great Northern bonds, each syndicate must be extra-large. Hence, Wall Street does not expect that more than two or possibly three vast enough financial groups can be mobilized for the bidding.

But every security sales manager wanted a whack at the bonds. Choice rail-bond merchandise has been scarce in the war years. Further, the ore, wheat and lumber-carrying Great Northern has come a long way financially since the late '305. Then analysts seriously questioned its ability to pay a $100 million debt due in 1946.

The experts did not count on the war-boom traffic. Entirely out of earnings, in 1942 and 1943 Great Northern reduced its $100 million 1946 maturity by $43 million. After the refinancing. Great Northern's funded debt will total $249 million.

So big, conservative Frank Gavin will get prompt answers to his invitations. And if the sale goes through according to plan, Great Northern's annual interest charges will be a modest $10.5 million a year, against $12.5 million of last year and the worrisome $19.5 million of 1932.