Modern Business (Volume 11); A Series of Texts Prepared as Part of the Modern Business Course and Service of the Alexander Hamilton Institute

This historic book may have numerous typos, missing text, images, or index. Purchasers can download a free scanned copy of the original book (without typos) from the publisher. 1917. Not illustrated. Excerpt: ... therefore are willing to compromise their claims and turn the equipment over to the reorganized lessee absolutely. 15. Reorganizations in Canada.--The reorganization of Canadian corporations in recent years has occurred chiefly in connection with industrial amalgamations. Prior to 1912, during a very active period in Canadian development, a large number of amalgamations were executed; heavy capitalization being one of the outstanding features of this movement. Since then, the majority of these amalgamated companies have had to be reorganized, resulting in many cases in pronounced reductions in the stock and bond holding of investors. One typical example may be cited. An industrial consolidation, with heavy capitalization, broke down in 1912. Action was taken by the directors and a bondholders' committee was appointed to save the company from complete disaster. In submitting their reorganization scheme, this committee pointed out that it was evident from the operations of the company, that the original capitalization involving a fixed charge of $400,000, was excessive. The average earnings for a period of 3% years were not less than $250,000 and under normal conditions the company should exceed this. A plan of reorganization was submitted, suggesting the formation of a new company. Under this plan, a drastic cut was made in the bonds and share capital. The holder of $1,000 par value of bonds in the old company received $250 first mortgage bonds in the new company, $500 new 6 per cent preferred stock and $250 new common stock. The reorganization plan is seen at a glance in the following table: Common stock $8,123,000 $8,135,000 $3,000,000 $3,000,000 Preferred stock 1,875,000 1,875,000 4,000,000 4,000,000 Bonds 15,000,000 8,000,000 5,000,000 3,000,000 $25, ...