Word: receiverships
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Their elevated, emanating from the famed "Loop" around Chicago's business center, was built for a city of 1,700,000 (present pop. 3,400,000), is now in receivership. Its last big purchase of new equipment was made just before the U.S. entered World War I. Their streetcars, owned by four different companies (all in receivership) and operated by a fifth, are oldfashioned, high-riding trolleys ("antediluvian arks"), 75% of which were built before Harding campaigned on his front porch. And they are so crowded that many Chicagoans cannot even reach a strap to hang...
...help build a subway, one of the strings attached was the unification of all city transportation facilities. His City Council passed a unification plan, voters adopted it 10-to-1 in a referendum. All bondholders approved the plan; so did the Federal Court which handles the receivership proceedings...
Result was a buying wave in senior receivership bonds at the very time prices for junior bonds and stocks were on the skids. By week's end the better-grade receivership bonds were selling at five-year highs...
...Profits and the Losses. The court decisions raised hob. Hardest hit were junior bondholders and stockholders in receivership railroads. They have watched railroad profits soar skyward for months, had become convinced they could get the ICC-sponsored reorganization plans changed enough to make their holdings highly profitable. When the Court said no, receivership rail stocks on the New York Stock Exchange nose-dived 50 to 80%. Prices for junior bonds jumped the tracks. Western Pacific preferred stock flopped from $3 to 70?; Rock Island 7% preferred from...
Pattern for the Future. The Court's decision was of lasting significance. Despite the boom in railroad profits, some 30 major U.S. railroads are still in the courts. Together these "broke" railroads operate nearly 30% of U.S, railroad mileage. One has been in receivership for 38 years. With a clear precedent and no higher court of appeal, these railroads can now stop going to law and knuckle down to the job of reorganizing. But it will be a tough ride: before ICC and the courts get through, their combined capitalizations will be cut from the pre-depression...