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Railway Equipment
Obligations



Compiled and Issued

by the

Bond Department

of the

Guaranty Trust Company of New York

140 Broadway

,, , u J «♦,»»» Fifth Avenue & 43d Street

33 Lombard Street

T ^ V r New York

L.onuon« i^* ^>



Third Edition

November 30, 1914



Ml'-'



^^^G^



Copyright 1914

by

Guaranty Trust Co. of New York



G « « •



w •



•:•< '••*,•••



....... i .« • . . . .



. Li-



\J



Abbreviations



Explanatory Note



A. = Annually.

C. = Coupon.

Interch. := Interchangeable.

r. = Registerable as to principal only.

R. = Fully registered.

S. A. =: Semi-annually.

V. = Obtainable in $500 denominations.

* = Indicates there is on the face of the bond or note, or in the
agreement securing it, a covenant which, in our opinion,
obligates the issuing company to pay interest without de-
duction for the Normal Federal Income Tax of 1%.

t = Indicates that we do not find such a covenant.



3



Abbreviations

Trustees



Am. T. Bos. = American Trust Co., Boston, Mass.

B. = Bankers Trust Co., N. Y.

C. = Central Trust Co. of N. Y.

Cit S. & T., Qev. =z Citizens Savings & Trust Co., Cleveland, O.
Col. = Columbia Trust Co., N. Y.
Com. St. L. = Commonwealth Trust Co., St Louis, Mo.
Com. T., Phila. = Commercial Trust Co., Philadelphia, Pa.
Com. T., N. Y. = Commercial Trust Co., N. Y.

E. = Equitable Trust Co. of New York.
Em. = Empire Trust Co., N. Y.

F. = Farmers Loan & Trust Co., N. Y.

F. & C. Tr., Louis. =i Fidelity & Columbia Trust Co., Louisville, Ky.
Fid. T., Bait. = Fidelity Trust, Baltimore, Md.
Fid. T., Phil. = Fidelity Trust. Philadelphia, Pa.
F. N. = First National Bank, N. Y.
F'k'n T. = Franklin Trust Co., Brooklyn, N. Y.
F. T. & S. B. Chic. = First Trust & Savings Bank, Chicago, 111.

G. = Guaranty Trust Co. of New York.
Gir. Phil. =:Girard Trust Co, Philadelphia, Pa.

G. T. & S. D., Phil. —Guarantee Trust & Safe Deposit Co., Philadelphia, Pa.
Guar. S. & T. Qev. = Guardian Savings & Trust Co., Cleveland, O.

H. T., Hob. = Home Trust Co., Hoboken, N. J.

Mer. T. & D., Bait. = Mercantile Trust & Deposit Co.. Baltimore, Md.
Merch. L. & T., Chic. = Merchants Loan & Trust Co., Chicago, 111.
M. V. T., St. L. = Mississippi Valley Trust Co., St. Louis, Mo.

N. T., Tor. = National Trust Co., Toronto, Can.
N. Y. T. = New York Trust Co., N. Y.
No. Nat. Bk., Toledo = Northern National Bank, Toledo, O.



O. C, Bos. = Old Colony Trust Co., Boston, Mass.

Pa. C. I. L. & G. A. = Penna. Co. for Insurance on Lives and Granting Annuities,

Pliiladelphia, Pa.
Phil. T.. S. D. & I. = Phila. Trust, Safe Deposit & Insurance Co., Philadelphia, Pa.
Prov. L. & T., Phil. = Provident Loan & Trust Co.. Philadelphia, Pa.

S. D. & T.. Bait. = Safe Deposit & Trust Co., Baltimore, Md.
St. L. U. T. = St. Louis Union Trust Co., St. Louis, Mo.
Sup. S. & T. Gev. = S'lpcn.ir Saving's & Trust Co., Cleveland, O.

T. G. & T. = Title Guarantee & Trust Co., N. Y.

U. S. T., N. Y. = United States Trust Co. of N. Y.
U. S. M. & T. = United States Mortgage & Trust Co., N. Y.

Un. = Union Trust Co., N. Y.
Un. T., Pitts. = Union Trust Co., Pittsburgh, Pa.



Railway Equipment Obligations*

On the following- pages we present short descriptions of the more im-
portant equipment obligations of the principal railways. The statements
given have been obtained as far as possible from original sources and include
some data which, so far as we know, have never been previously published.
This information we believe to be accurate, but we would be glad to have
our attention called to omissions or errors for insertion or correction in sub-
sequent editions.

i By way of introduction we wish to present some considerations bearing
on the history and present investment position of this class of security.

As the name indicates, these securities are issued to provide railway
companies with funds to pay a part of the cost of new rolling stock — cars
and locomotives. They are variously described as Equipment Bonds or Notes,
and Car Trust or Equipment Trust Certificates, and are generally issued in
one of two forms:

(1) Car Trust or Equipment Trust Bonds and Notes, which are direct
obligations of a railway company or of some association formed for
the purpose, and, if the latter, guaranteed by endorsement by the Rail-
way Company. Such bonds or notes are secured by title to the equip-
ment purchased, and by a Contract of Conditional Sale or of Lease of
such equipment to the Railway Company as lessee or purchaser, both
title and contract being held under a Trust Agreement for the benefit
of the bondholders.

(2) Car Trust or Equipment Trust Certificates secured by title to the
equipment purchased and by a Contract of Lease to the Railway Com-
pany. The title may be taken in some individual or association, and a

jL contract with the Railway made by such individual or association as

\ lessor and both title and contract assigned to a Trustee, or the title may

J/ be vested originally in the Trustee and the lease made by the latter

"^ direct to the Railway Company. Certificates are issued by the

Trustee, either in the form of a "certificate of beneficial interest" in

the lease, or in the form of "shares" in an association acting as above

*For a more extended discussion of this subject we refer the reader to Cham-
berlain's Principles of Bond Investment, Chapter XXIII, Henry Holt & Co., New
York. 1911.



n

^



stated, both title and contract of lease being held under a trust agree-
ment for the benefit of the certificate holders. Payment of principal
and interest of the certificates is further guaranteed by covenant of
the Railway Company. This latter form is usually called the "Phila-
delphia Plan," and originated because some of the states and prin-
cipally Pennsylvania does not recognize the conditional sale as a
proper principle for the issuance of equipment bonds.

The Trusts securing these obligations are created for periods running
from ten to fifteen years, the former being the usual duration. An initial
payment on account of the cost of the equipment covered amounting to from
10% to 25% is usually made by the Railway and notes or certificates repre-
senting the remainder — 75% to 90% of cost — are issued payable in equal
annual or semi-annual instalments with interest payable semi-annually.
Bonds so secured have sometimes been issued all maturing at the end of
twenty years, a Sinking Fund being provided for the annual retirement of
bonds, or for the purchase of additional equipment. These, however, are
unusual and the present trend is towards an issue payable in twenty equal
semi-annual instalments.

/" The general terms of the Trust Agreements securing these obligations
are now established, and the law covering the validity and interpretation
is well settled. The forms are subject to a number of technical variations
which do not, however, materially afifect the actual security. The Indenture
definitely states the amount of the issue, rate per cent., form, and maturity,
together with a description of the equipment covered, its cost and the initial
payment by the Railway. Each piece of equipment must be marked, as
evidence of ownership and for identification, with the name of the Trustee
followed by the words "Trustee, Owner" or some similar inscription. The
Railway covenants to keep the equipment insured against loss by fire, to
maintain it in good order and repair — ordinary wear and tear excepted, to
replace items that may be destroyed, and to furnish the Trustees from time
to time with lists showing the physical condition of each item.

Under either of the forms of issue described above the title to all the
equipment remains in the Trustee until the debt is fully paid and under the
Trust Agreement and Lease or Contract of Sale the Trustee has the right in
case of default to take possession of and sell the property covered, and also
has a right of action against the Railway Company for principal and interest
of the debt, or for any part which may be represented by deficiency in the
amount realized at such sale of the equipment.



8



The initial payment of part of the cost provides an immediate margin of
security for the equipment obligations. The annual depreciation of the
equipment as estimated under the rules of the Master Car Builders Associa-
tion is: for wooden car bodies, and trucks other than all metal, 6%; for
wooden car bodies with steel underframe, 5j/2%; and for all metal car bodies
and trucks, 5%, upon the yearly depreciated value thereof. Where, therefore,
the principal of the debt is paid in instalments as above, the margin of
security under normal conditions of business would constantly increase as
the earlier maturities are paid off.

Table showing depreciated value of equipment and per cent, of margin of
security over outstanding notes at the end of each year of the life of ten-year equipment
trust, payable in equal instalments:







Wooden


Equipment








Value at 6%


% of Cost as Represented


% Margin of


% of Cost as Represented


% Margin of


Year


Depreciation


by Outstanding Notes.


Security. 10%


by Outstanding Notes.


Security. 25%




10% of Cost Paid.


of Cost Paid


25% of Cost Paid.


of Cost Paid


New


100


90


11


75


33


1


94


81


16


67.5


39


2


88.36


72


21


60


47


3


83.05


63


32


52.5


58


4


78.07


54


44


45


73


5


73.39


45


63


37.5


96


6


68.98


36


91


30


130


7


64.84


27


140


22.5


188


8


60.95


18


239


15


306


9


57.29


9


514


7.5


663


10


53.86


All Paid




All Paid





Steel Equipment.





Value at 5%


% of Cost as Represented


% Margin of


% of Cost as Represented


% Margin of


Year


Depreciation


by Outstanding Notes.


Security. 10%


by Outstanding Notes.


Security. 25%




10% of Cost Paid.


of Cost Paid


25% of Cost Paid.


of Cost Paid


New


100


90


11


75


33


1


95


81


17


67.5


40


2


90.25


72


25


60


50


3


85.73


63


37


52.5


63


4


81.45


54


51


45


81


5


77.27


45


72


37.5


106


6


73.50


36


104


30


145


7


69.83


27


158


22.5


212


8


66.34


18


268


15


342


9


63.02


9


600


7.5


740


10


59.87


All Paid




All Paid





The wonderful increase in the number of all-steel passenger cars placed
in service in the country since January 1, 1909, is all the more remarkable
when we remember that the first modern experimental all-steel passenger
car for use on steam roads was not placed in service until 1906. The use of
the steel frame, side door suburban car on the Illinois Central in the fall
of 1902 was probably the first move toward the introduction of steel passenger
equipment. Experience of a crude design of side door equipment in tem-
porary use during the Chicago World's Fair demonstrated the value of this
principle in handling suburban traffic and a steel frame was adopted for the
superstructure because of its marked advantages for this type of construction.

The Pennsylvania Railroad officers became interested in the develop-
ment of an all-steel car because of the necessity of providing fireproof equip-
ment under the North and East Rivers in connection with the terminal in
New York. The first experimental cars for through passenger traffic were
built by the Pennsylvania Railroad at the Altoona and the Southern Pacific
at the Sacramento shops. These were built in 1906 ; but it was not until
the middle of 1907 that the first real move was made toward the introduction
of the all-steel car for passenger service. Today many of our roads use
nothing but all-steel or steel underframe equipment on their high-class pas-
senger trains. The behavior of these cars in rough service and wrecks has
indicated their value from a safety standpoint, although there is still a con-
siderable question as to the best type of design to properly dissipate the end
shocks and afford the greatest protection.

One of the most important considerations in connection with Equipment
notes is that in cases of receivership or reorganization of a Railway Com-
pany, it is the practice to maintain payment of both principal and interest
of equipment issues under authority of Court, the Court authorizing the
Receiver to borrow money for this purpose if necessary. This principle is
based on the fact that the equipment is necessary to the operation of the
property, and that the railway, as a quasi - puh\ic corporation, must be kept
in operation for the public convenience. From this it has usually resulted
that equipment obligations have fared better in reorganizations than the
mortgage bonds of the reorganized or foreclosed company. A study of the
history of the various Receiverships of the past years forcibly illustrates this
point as well as the soundness of this plan of financing and the protection
afforded the investor.

The following railway companies, reorganized between 1888 and 1914
either with or without foreclosure, all had outstanding equipment obligations.
In every case principal and interest of such obligations were paid in full,



10



while other securities, with a few exceptions, were reduced in rate or amount,
or both :

Atchison, Topeka c*v: Santa Fe Railroad.

Baltimore & Ohio Railroad.

Buffalo & Suscjuehanna R. R. Corp.

Central Railroad & Banking Company of Georgia,

Chesapeake .J^c Ohio Railway.

Chicago tS: Southern Railway.

Columbus, Hocking Valley & Toledo Railway.

(Now Hocking Valley Railroad).
Kansas City, Pittsburgh & Gulf Railroad.

(Now Kansas City Southern Railway).
New York, Lake Erie &: Western Railroad.

(Now Erie Railroad).

Norfolk & Southern Railway.

Northern Pacific Railroad.

Philadelphia t^ Reading Railroad.

Richmond & Danville Railroad. ) ■»! c i.u -n •^

r- ■ r) c TD 1 f Now Southern Railway.

Georgia racinc Railway. )

Seaboard Air Line.

Southern Indiana Railway.

Toledo, St. Louis, &. Kansas City Railroad Co.

(Now Toledo, St. Louis & Western Railroad).
Union Pacific Railway.
The following railway companies, reorganized after foreclosure, either
paid their equipment obligations in full or offered the holders an advan-
tageous exchange of securities which amounted to considerably more than
such payment. Other securities were reduced in rate or amount:
^, ^ Denver & Rio Grande Railway.

^ , , Norfolk & Western Railway.
The Atlanta, Birmingham & Atlantic R. R. Company has been in the
hands of receivers, but was bought in by the General Protective Committee
in June, 1914.

The following roads are at present in the hands of a Receiver: —
Buffalo & Susquehanna Railway.
Chicago & Eastern Illinois Railroad.
Chicago, Peoria &: St. Louis Railroad.
Cincinnati, Hamilton & Dayton Railroad.



11




Colorado Midland Railway.

International & Great Northern Railway.

Kansas City & Memphis Railway.

Missouri, Oklahoma & Gulf Railroad.

New Orleans, Texas & Mexico Railroad.

Pere Marquette Railroad.

Pittsburg, Shawmut & Northern Railroad.

St. Louis & San Francisco Railroad.

Trinity & Brazos Valley Railway.

Wabash Railroad,

Wheeling & Lake Erie Railroad.
All of the foregoing are in default on one or more issues of mortgage
bonds, but, with the exception of the Cincinnati, Hamilton & Dayton Railway
Company and the Pere Marquette Railroad Company, are meeting their
equipment obligations. There are special conditions surrounding the Cin-
cinnati, Hamilton & Dayton Railway issue, which make its case one from
which general conclusions cannot be drawn. Regarding the default in the
principal of Pere Marquette Equipmicnt issues, an agreement has been reached
between the Receiver of the road and holders of these bonds whereby the
Receivers are to deposit a certain sum each month with the Columbia Trust
Company of New York to be applied to payment of interest and principal of
these equipment obligations.

From the above review it will be noted that in practically every case of
railway reorganizations the principal and interest of equipment obligations
have been paid in full or the holders otherwise reimbursed without loss.
Final settlement in the matter of an issue of the Detroit Southern Railway
Co., now the Detroit, Toledo & Ironton R. R., is still pending. The Com-
pany defaulted in June, 1908, in the payment of the interest on $1,656,000
Car Trust Notes. The equipment covered by these notes was sold, and,
as we understood, was purchased by or on behalf of the noteholders and all
of the notes were used in payment of the purchase price. The notes have
not yet been cancelled, but it is expected that they will be turned in shortly
and the matter closed.

While these securities are not generally listed on any exchange the
majority of the issues enjoy an active market and sale can usually be made
without difficulty. In view of the foregoing we believe that this class of
security combines in as high a degree as any, the three essential require-
ments of a good investment, namely : security, marketability and interest



return.



>r



12



RAILWAY EQUIPMENT OBLIGATIONS



Alabama Great Southern R.R. Co.
Car Trust Series "B" . . . 4K'%



Dated Feb. 1. 1905 Due $50,000 S.A.

to Feb. 1. 1915
Issued $1,000,000 Outstanding $50,000

*Int. pay. Feb. and Aug. 1 at Blair & Co.. N. V.
Trustee, N.YT. Form C



Alabama Great Southern R.R. Co.
Car Trust .Series "C" . . . 4^'%



Dated May 1, 1906 Due $74,000 S.A.

to Nov. 1, 1915,
$73,000 May 1, 1916
Issued $1,479,000 Outstanding $221,000

*Int. pay. May and Nov. 1 at Blair & Co.. N. Y.
Trustee. F'k'n-T Form C



Alabama Great Southern R.R. Co.

Car Trust Series "D" . . . 4^%



Dated July 1. 1909 Due $50,000 S.A.

to July 1, 1919
Issued $1,000,000 Outstanding $500,000

*Int. pay. Jan. and July 1 at Em.

Trustee, Em. Form C



Algoma Central & Hudson Bay Ry. Co.

Car Trust Bond Series "A" . . 6%



Dated May 15. 1911 Due $50,000 A.

to May 15. 1921
Issued $500,000 Outstanding $350,000

*Int. pay. May and Xov. 15 at .Maitland. Coppcll
& Co.. N. Y.
Trustee, N.T. Tor. Form C



Security :

12 Locomotives
1,000 Bo.x Cars
250 Gondola Cars
200 Coke Cars
100 Ore Cars
Equipment cost $1,141,246.50. Outstanding notes
represent 4% of original cost.



Security:

8 Locomotives
250 Coke Cars
250 Flat Cars
250 Gondola Cars
250 Steel Hopper Cars
1.000 Box Cars
Equipment cost $1,741,002.50. Outstanding notes
represent 12% of original cost.



Security:

20 Locomotives
10 Passenger Cars
3 Mail Cars
2 Baggage Cars
250 Steel Hopper Cars
375 Steel Gondola Cars
200 Steel Un.lerframe Flat Cars
Equipment cost $1,207,903.60. Outstanding notes
represent 41% of original cost.



Security :

20 Locomotives
230 Freight Cars
Equipment cost $525,000. Outstanding notes

represent 56% of original cost.
Callable at par and interest on any interest date.



12a



RAILWAY EQUIPMENT OBLIGATIONS



Algoma Central & Hudson Bay Ry. Co.
Car Trust Bonds Series "B" . . 6%



Dated Aug. IS, 1911 Due A.

to Aug. 15, 1921
Issued $225,000 Outstanding $157,500

*Int. pay. May and Nov. 15 at Maitland, Coppcll
& Co., N. Y.
Trustee, . Form C.

Algoma Central & Hudson Bay Ry. Co.
Car Trust Bonds Series "C" .



Security :

105 Freight Cars
2 Snow Plows

Also Passenger Train Equipment
Callable at par and interest on any interest date.



Dated May 15, 1912 Due $7,000 A.

to May 15. 1917,
$8,000 May 15, 1918-1922
Issued $75,000 Outstanding $61,000

*Int. pay. May and Nov. 15 at Maitland, Coppell
& Co., N. Y.
Trustee. . Form C.



Security :

25 Flat Cars
88 Ore Cars
1 Crane
1 Wrecker
Callable at par and interest on any interest date.



American Refrigerator Transit Co.

Equipment Notes Series "A" . 5%



Dated June 1, 1911 Due S.A.

to June 1, 1921
Issued $1,188,000 Outstanding $774,000

*Int. pay. June and Dec. 1 at G.

Trustee, G. Form C



Security :

1,000 Steel Underframe Refrigerator Cars
Equipment cost $1,314,400. Outstanding notes

represent 58% of original cost.



American Refrigerator Transit Co.
Equipment Notes Series "B"



5%



Dated Dec. 2. 1912



Due $24,000 S.A.
to Dec. 1, 1922
Issued $480,000 Outstanding $408,000

*Int. pay. June and Dec. 1 at F.T.&S.B.
Trustee, F.T.&S.B., Chic. Form C.



Security :

500 Steel Underframe Refrigerator Cars
Equipment cost $573,630. Outstanding notes rep-
resent 71% of original cost.



12b



RAILWAY EQUIPMENT OBLIGATIONS



American Refrigerator Transit Co.
Equipment Notes Series "C"



5%



Dated May 1. 1*)I3 D ic $105,000 S.A.

to May 1, 1923
Issued $2,150.(^)0 Onl-taiKlipR $1.7X5,000

*!nt. pay. May and Nov. 1 at F.T. & S. and F.
Nat., N. Y.
Trii.-tee, F.T.&S., Cliic. Form C, r.



Ann Arbor R.R. Co.

Equipment Notes Series "A"



5%



Dated Nov. 1. 1909



Due $33,000 S..\.
to Nov. 1, 1919
Issued $660,000 O.itstanding $330,000

*Int. pay. May and Nov. 1 at B.

Trustee, B. Form C



Ann Arbor R.R. Co.

First Lien Equip. Notes Series "B" 5%



Dated Jan. 1, 1911



Issued $600,000



Due $30,000 S..^.
to Jan. 1, 1921
Outstanding $330,000



♦Int. pay. Jan. and July 1 at Em.

Trustee, Em. Form C



Security :

2,000 Steel L'nderframe Beef Cars
Equipment cost $2,632,000. Outstanding notes

represent 67% of original cost.



Security:

500 Steel Gondola Cars

300 Steel Underframe Bo.x Cars

Equipment cost $826,880. Outstanding notes rep-
resent 39% of original cost.



Security :

13 Locomotives

4 Passenger Cars

2 Cafe- Parlor Cars

5 Motor Cars

105 Steel Box and Refrigerator Cars
1 Steel Car-Ferry
Equipment cost $853,407. Outstanding notes rep-
resent 3S% of rir.riiial cost.
Redeemable at 102'/^.



12c



RAILWAY EQUIPMENT OBLIGATIONS



Ann Arbor R.R. Co.

American Loco. Equip. Notes



5%



Dated Aug. 1, 1912



Due $7,500 S.A.
toAug. 1,1915
Issued $41,577 Outstanding $15,000

*Int. pay. Feb. and Aug. 1 at Harvey Fisk & Sons,
N. Y.



Security :

3 Freight Locomotives
Equipment cost $56,577. Outstanding notes rep-
resent 26% of original cost.



Atlanta, Birmingham & Atlantic R.R. Co.
Equipment Trust Notes Series "A" 5%



Dated May 1, 1906 Due $60,000 S.A.

to May 1, 1916 '
$66,000 Nov. 1, 1916

Issued $1,206,000 Outstanding $246,000

*Int. pay. May and Nov. 1 at E.

Trustee, E. Form C



Security :

1,100 Box Cars
300 Flat Cars
19 Passenger Cars
6 Mail and Baggage Cars
16 Locomotives



Atlanta, Birmingham & Atlantic R.R. Co.
Equipment Bonds Series "B" . 5%



Dated July 1, 1907 Due $86,000 S.A.

tojuly 1,1917
Issued $1,720,000 Outstanding $602,000

*Int. pay. Jan. & July 1 at Harris, Forbes & Co.,
N. Y.
Trustee, G. Form C, r.



Security :

1,200 Coal Cars
500 Box Cars
300 Flat Cars
30 Caboose Cars
25 Locomotives
Equipment cost $2,317,998.90. Outstanding bonds
represent 25% of original cost.



Atlantic Coast Line R.R. Co.

Equipment Bonds Series "A" . 4%



Dated Mar. 1, 1907 Due $225,000 S.A.

to Sept. 1, 1917
Issued, $4,500,000 Outstanding $1,123,000

*Int. pay. Mar. and Sept. 1 at U.S.Tr.

Trustee, S.D.&T., Bait. Form C, r.



Security :

100 Locomotives
2,500 Steel Underframe Box Cars
780 Steel Underframe Flat Cars
25 Passenger Cars

8 Mail and Express Cars
20 Express Cars
Equipment cost $5,000,000. Outstanding
represent 22% of original cost.



bonds



12d



RAILWAY EQUIPMENT OBLIGATIONS



Atlantic Coast Line R.R. Co.

Equipment Bonds Series "B" . 4i/


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