Business & Finance: Sea Change

The corridors of the Cannon Street Hotel in London are not accustomed to the mixed contents which one day last week filled them to overflowing. There were gentlemen in morning coats, grim-eyed widows and doddering old men. All of them displayed a pressing desire to get into a certain large room where Britain's right financially reverend Sir Josiah Charles Stamp sat at a table. All or nearly all had a right to enter, being preference shareholders of the White Star Line. At length Sir Josiah called the packed room to order and presented to the shareholders Sir William McLintock, an expert accountant who was to tell them about the condition of their company.

The comfortless information which he gave them was of this nature:

That their company, which had a book value of some $67,000,000, was really worth only $41,000,000 and its liabilities offset more than half that figure.

That their equity in the company, supposedly amounting to over $24,000,000, really amounted to only $19,000,000, the entire equity of the common shares having been wiped out.

That the dividend which fell due to them on Jan. 1 could not be paid and that they were entitled to demand that it be paid by the Royal Mail Steam Packet Co. which as holder of all the common shares had guaranteed the principal and interest of the preference shares.

That it would be inadvisable to insist on the fulfillment of the guarantee because the Royal Mail Co. was in still worse condition than White Star.

That Royal Mail, book-valued at $112,000,000, was estimated to be really worth only $68,000,000.

That Royal Mail's profits and generous dividends from 1926 to 1928 had in reality been taken from internal reserves and the company in spite of the impression given by its Chairman Lord Kylsant had actually been losing money during those years.

Said Accountant Sir William: "If the companies are not continued as going concerns, the assets will realize very considerably less than the estimated values."

The wild-eyed White Star preference shareholders exclaimed and ejaculated, said ugly things about Lord Kylsant, chairman of their own company as well as of Royal Mail. Lord Kylsant did not hear them. He was far away on the sunny Island of Madeira taking a vacation for the sake of "his wife's health," a leave of absence which was pointedly suggested to him more than a year before by London financial interests.

Then the irate White Star shareholders voted 4,506 to 89 not to press their claim against Royal Mail until June, thereby saving that company from immediate failure.