about $51,756,000. Mr. Clayton submitted statements-not figures, simply this statement; this is his language [reading]: The present capitalization, including both the bonds and stocks of the two railway companies, excluding bus company, is $45,108,000-showing an overissue of stocks and bonds of approximately $7,000,000. Mr. CLAYTON. Did I not give the figures? I read The CHAIRMAN. No; you gave no figures on the outstanding indebtedness. Here is your testimony (referring to transcript). You read from the letter the proposed issue. You gave no figures as to the outstanding liabilities of the existing companies. STATEMENT OF HARRISON BRAND, Jr.-Resumed Mr. BRAND. The difference, Mr. Chairman, is $6,648,000, which is a liability of the existing companies and has been omitted by Mr. Clayton. The reason, apparently, for his omitting that is that in the new plan the new company does not take over that liability and that the liability still exists. The new company can not wipe out a liability that stands against the properties and the properties are taken over subject to that liability, $6,648,000. The Washington Railway & Electric Co., which becomes under this plan a holding company, is to execute its bond to the new company, guaranteeing or providing that they will pay, as they mature, the principal and interest on that $6,648,000 worth of bonds. Those bonds are secured under the trust indenture by a deposit of the common stock of the Potomac Electric Power Co.; and the contingency of the property taken by the new company ever having to pay those bonds is extremely remote. The CHAIRMAN. This statement of Mr. Clayton is that the present capitalization, including both bonds and stocks, of the two railroad companies, excluding the bus company, is $45,000,000. You have submitted a chart here showing the combined stock issue of $27,000,000 and bond issue of $24,756,000, or a total of stocks and bonds of the two companies of $51,756,000. Mr. Clayton makes the statement without giving any figures, that this is only $45,000,000. Mr. BRAND. My figures are correct; and the difference, as I said, is exactly $6,648,000, which is the exact amount of the bonds that are now outstanding that the new company is relieved of by the Washington Railway & Electric Co. guarantee. Mr. CLAYTON. May I ask, just for the purpose of seeing who is right of course, I am subject to correction: Then, Colonel Brand, the statement contained in this pamphlet, which contains the letter and also the summary of plan to the commission-this statement made here that the total capitalization of the company is $52,400,000 is not correct? Mr. BRAND. That is not correct; no. That $550,000, which is a contingent liability, can hardly be considered a part of the capitalization. Mr. CLAYTON. You think it is a correct statement? I can not get your answer. Mr. BRAND. A contingent liability can hardly be called a part of the capitalization, and $550,000 of that total is a contingent liability. Mr. CLAYTON. A contingent liability has got to be provided for by capitalization of some kind, has it not? Mr. BRAND. That contingent liability is to relieve the guarantors on those notes. Mr. REID. The bonds have to be guaranteed by somebody? Mr. REID. In the new organization have we not to provide who gets the money? Mr. BRAND. Until they be paid by the new company. If the Washington Rapid Transit Co. does not pay it-it is only contingent, though. Mr. REID. Somebody should pay it. Mr. BRAND. Certainly, somebody has got to pay it. But you can not consider it, so far as I can see, part of the capitalization of the new company until it is determined they are going to be the ones to have to pay it. Mr. REID. All right. Mr. CLAYTON. May I ask this question, in the hope that it will probably lead directly to that? Is this statement correct contained in this unification agreement pamphlet, in which Mr. Wilson sets out these facts, that the funded debt under the heading of "Capitalization," and if any of these figures are incorrect you may so statethat the funded debt will be $18,108,000 and unfunded debt $550,000. Stock, 120,000 shares at 7 per cent cumulative preferred stock, series A, $12,000,000; 217,420 shares, approximately, of common stock $21,742,000, making a total capitalization as set forth here by the author of the plan to the Public Utilities Commission of $52,400,000? Now, would you kindly point out which of those amounts are correct or incorrect? Mr. BRAND. The capitalization is restated in the revised plan itself, and you will find in there that the $550,000 is omitted. The rest of it is correct. The CHAIRMAN. That is the difference between the figures you gave and the figures Mr. Clayton gave? Mr. BRAND. No, sir; that is not the difference there; that is the difference between the figure that I used as the capitalization of the new company and what was stated in Mr. Wilson's original letter. The difference between the $45,000,000 that Mr. Clayton gave The CHAIRMAN. We are coming to that later. He did not say anything in his statement as to the outstanding indebtedness. He is now touching on new capitalization. We are coming to that in a moment. Mr. BRAND. Yes, sir. The CHAIRMAN. As I understand it, you gave figures here to the committee showing $51,850,000 as the capitalization of the new company? Mr. BRAND. Yes, sir. The CHAIRMAN. You have omitted $550,000, which would make the exact sum given by Mr. Clayton, $52,400,000. So that is the difference there which you say should not go into that capitalization? Mr. BRAND. That is right. The CHAIRMAN. As to the $45,000,000 Mr. Clayton has made no statement. He gave the present capitalization as $45,000,000, and he did not say in his statement that the outstanding indebtedness, liabilities in the form of common and preferred stock and bonds, $51,756,000, with a difference of approximately $7,000,000. Mr. CLAYTON. I will make that statement now. My statement is this, that according to these figures here submitted by the author of the plan to the commission and remaining unchanged up to this time, so far as my knowledge goes, the bond issue of the new company will be $18,108,000; that that bonded debt is carried over from the two companies. To that is added for the new company a stock issue of $33,742,000. Mr. CLAGETT. As counsel for Mr. Wilson, I will say that Mr. Clayton is incorrect; that Mr. Wilson made no statement as to the present capitalization of the company. It is not in this document at all. The CHAIRMAN. I do not see where there is very much difference as to the proposition of the capitalization of the new company. But there is wide discrepancy between the statement of Mr. Clayton and that of the Public Utilities Commission. Mr. CLAYTON. My statement is supported, now, by these figures here, that the bond issue of the new company is $18,102,000, eliminating and that the stock issue is $33,742,000, which would be approximately what I stated. The CHAIRMAN. No, you have not stated anything about your figures, $45,000,000. We want to know where you get the statement that $45,000,000 is the present outstanding bonds. Here are the commission's figures. Mr. CLAYTON. My statement as to that is this, that according to the statement the bond issue-the bonds taken over by the new company amount to $18,108,000; that the present stock issues of the two companies as they stand to-day are $12,000,000 for the Capital Traction Co. and $15,000,000 for the Washington Railway & Electric Co.; and if you will add those up you will find that they aggregate about the $45,000,000. The CHAIRMAN. Those are not the figures given here. Mr. CLAYTON. These are the figures given here, and it is a matter of substantive fact that the present stock issues of the companies are as I stated, one $15,000,000 and the other $12,000,000. There is no dispute as to that. Mr. FLEHARTY. Stock? Mr. CLAYTON. I meant stock. Mr. BRAND. By Mr. Clayton's own statement he has combined the present stock issues with the bond issues to be taken over by the new companies. That is exactly what he said. Now, the new company does not take over all of the bond issue of the present companies; and therein is the difference. Under this plan-I will read you the exact words [reading]: The Washington Co. shall at the time of closing hereunder, execute its own bond to the new company and to the Capital Co. whereby it shall agree to pay, when due, the principal and interest of $4,002,000 principal amount of consolidated bonds of Washington Railway & Electric Co. described above, and $2,646,000 principal amount of general and refunding bonds of Washington Railway & Electric Co. described above. Now, those bonds are not included in the capitalization of the new company, but are a liability of the Washington Railway & Electric Co. now. Mr. REID. How much do they amount to? Mr. BRAND. $6,648,000, the exact difference between Mr. Clayton's amount and my amount. Mr. CLAYTON. And yet the author of the plan does not include them in his letter to the Public Utilities Commission. Mr. BRAND. He is not talking about. them. Mr. CLAYTON. I know; but you have now included them. Mr. BRAND. I include them under the present arrangement, but I did not include them under the new company's liability. The CHAIRMAN. I think the exact figures as given by the Public Utilities Commission ought to go into the record, and I will read them for that purpose: The Washington Railway & Electric Co. has common stock $6,500,000, preferred stock $8,500,000, making a total of $15,000,000. The Capital Traction Co. has outstanding common stock only of $12,000,000, making a total for the two companies of outstanding stock, preferred and common, of $27,000,000. The combined bond issues of the two companies are $24,756,000, the issues being given here as to form of mortgage. The total bonds, therefore, are $24,756,000, and the total stocks and bonds $51,756,000. Mr. REID. Now, read into the record what the new company will have for those same things, and then we will have it all. The CHAIRMAN. Under the statement submitted by the Public Utilities Commission, the new company will have common stock of $19,342,000, and preferred stock of $12,000,000; a total of stock of $31,342,000; bonds a total of $18,108,000; total stocks and bonds $49,450,000; stock to be issued for net current assets, which is only estimated, $2,400,000; or a grand total of $51,850,000. Mr. CLAYTON. May I say that stock issue does not include what is included here, and which is provided for, the $2,400,000 worth of stock. Mr. BRAND. Yes, it does, Mr. Clayton. Mr. CLAGGETT. Yes, it does. The CHAIRMAN. I just added $2,400,000, making a total of $51,850,000. Mr. CLAYTON. These two additions are $33,000,000. The CHAIRMAN. What two additions? Mr. CLAYTON. The stock issue. He says $31,000,000, and these are $33,000,000. Mr. COOMBS, Jr. He adds $2,400, 000. The CHAIRMAN. $31,342,000. Mr. CLAYTON. That is what I read, and mine reads $33,000,000. The CHAIRMAN. I added $2,400,000, which is the stock to be issued for net current assets, estimated. It is added down here, making a total below here. Above, the common stock is to be $19,000,000 and preferred $12,000,000, making a total of $31,342,000. At the bottom they add the stock to be issued for net current assets, which is estimated, $2,400,000, making a grand total of $51,850,000. Those are the figures of the Public Utilities Commission. There was such a wide variance between the figures submitted that I thought they ought to clarify the record. Mr. CLAYTON. I took what I thought was the very best evidencethe evidence suggested by the author of the plan himself to the Public Utilities Commission. He ought to understand thoroughly what the financing of his company is. May I ask Colonel Brand one question, and then, so far as I am concerned, I will not intrude? Mr. CLAGETT. It is perfectly clear that Mr. Wilson's document, to which Colonel Clayton refers, stated explicitly what the capitalization of the new company would be and did not refer directly nor indirectly to the present capitalization of the existing companies. Mr. CLAYTON. As it stands now, according to the commission's figures, will the total capitalization of the new company, bonds and stock, exceed the bond and stock issues of the two companies as they exist today? Mr. BRAND. That depends entirely, Mr. Clayton, on the amount that is issued for the net current assets. If the $2,400,000 is correct, there would be an excess of $94,000 under this. But I would like to say at this time that securities amounting to $98,000 of the Washington & Maryland Railroad in the hands of the public a year ago will be eliminated under this plan. The securities of the Washington Interurban, owned by the Washington Railway & Electric Co. through the Washington & Rockville Railroad, will also be eliminated under the plan; and the Washington & Rockville Railroad, while it will still continue to exist, will have transferred its properties to this new company and its capitalization will not be added to this total. Those would be $275,000. The reason for keeping that company in existence is that it owns certain other subsidiaries that have not been included in this at all: The Potomac Electric Appliance Co. andMr. REID. Let us not get away from this. Mr. BRAND. My answer to his question was it depends on the amount of stock issued for the net current assets. Mr. CLAYTON. Would you say now to this committee, as it stands on the figures here, that the bond and stock issues of the new company exceed or are even with the stock and bond issues of the two companies as it stands right now on the record? Mr. BRAND. As I said, it depends on the amount of stock issued for the net current assets. This $2,400,000 was an estimate. Now, the amount that is to be issued for the net current assets depends on the amount of net current assets that are turned over by the Capital Traction Co. That amount is to be duplicated by the Washington Railway & Electric Co., and stock of a par value equal to those net current assets is to be included under the plan. Every day the current net assets are changing, so I can not say just what it will be. Mr. REID. You answer it this way: Give me the total amount of stock-certificates, stock, bonds, or other evidence of indebtedness against the two companies. Mr. BRAND. The total amount of bonds Mr. REID. Stocks, certificates of stock, bonds or other evidence of indebtedness outstanding against the two companies. Mr. BRAND. Against the two companies, the Washington Railway & Electric Co. and the Capital Traction Co., is $51,756,000. Mr. REID. What is the extent your new capitalization can be under the law, paragraph 76 of your present utility act? That is the point we make. Mr. BRAND. If the Public Utilities Commission itself were- Mr. BRAND (continuing). Were to approve of this merger that would be correct; that is the actual amount of stocks and bonds now of the two companies. Mr. REID. How much? |