Word: commoners
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Dates: during 1930-1939
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...plan: to clear up, the $9 a share accrued on 287,225 preferred shares, exchange of each old 6%, $100-par preferred share for ½ share of new preferred and 2¾ common. The plum if the deal goes through: payment of a 30? dividend, first since 1931, on the common...
...strong indication of the way out for railroads already bankrupt, hogtied in the Courts by common stockholders' claims, came last week from the Supreme Court. The Court was unanimous and its spokesman was Mr. Justice William Orville Douglas, who first made his jurisprudential name as a Yale Law School professor by analyzing bankruptcies for the SEC. Actually the case did not concern a railroad at all. It concerned obscure Los Angeles Lumber Products Company, Ltd. and was chosen as a kind of Schechter case for a New Deal test of Section 776 of the Federal Bankruptcy...
Under 776, the company's Common stockholders had got over 67% of preferred holders to agree to a plan giving them a piece of the solvent, new company (to be known as Los Angeles Shipbuilding & Drydock Co.), had got their plan past the Federal courts as fair, feasible and equitable...
...former Investigator Douglas had been suspicious for years about plans being railroaded through courts without the judges having had a chance to decide whether they were scrutinizably fair, feasible and equitable. He had attacked many a plan as inequitable for giving the common stock rights when it really had no equity if creditors and preferred stockholders got their just due. When Douglas became Chairman of the SEC, he sponsored the Chandler Act which set up a special SEC division to study reorganization plans and inform judges about them as "friends of the Court...
Friends of the Supreme Court in this case were SEC, ICC, Solicitor General Robert H. Jackson. Mr. Douglas thought the Court's friends were right, that the common stockholders had pulled a fast one on the preferred, ruled that they could get their foot inside the door of the reorganized company only if they paid their way in with new money. The decision thus strengthened the hands of bondholders, preferred stockholders in future reorganizations. Wrote Mr. Justice Douglas...