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Shanferoke contended that New Rochelle Coal & Lumber is solvent and therefore had no right to apply for reorganization under Section 77b. If solvent corporations could seek reorganization under the Bankruptcy Law, said the plaintiff, creditors would be deprived of their property (i. e. claims) in violation of the ''due process" clause of the Fifth Amendment. With this argument the Circuit Court did not agree. Ruling that no violation of the Fifth Amendment was involved, it declared, in effect, that a solvent corporation may apply for permission to reorganize under Section 77b. Last week Shanferoke Coal had 14 days left in which to file an appeal with the U. S. Supreme Court. If upheld, the decision may send solvent corporations streaking to court to share with insolvent corporations the power, under Section 770, to make reorganizations binding on stubborn minorities.
Leather. Meanwhile most solvent corporations will continue to thresh out recapitalization plans with security holders and creditors outside the courts. Two notable companies which have completed this process are Wilson & Co. and Armour & Co. One still in the throes of reorganization without recourse to Section 77b last week was American Hide & Leather Co.
Founded in the gaudy 1890's, American Hide & Leather today has only two tanneries, one in Lowell, Mass., the other in Ballston Spa, N. Y. No dividends have ever been paid on its common stock. Arrears on $10,000,000 of preferred stock now stand at $21,000,000 or $214.25 per share, highest arrearage of any preferred issue on the New York Stock Exchange.
The common stockholders have long realized that they would see no dividends until the preferred arrears are removed. But the arrears cannot be paid without ruining the company. American Hide & Leather was last week proposing to its stockholders to solve the dilemma by replacing the 7% preferred with new 6% preferred, reducing the dividend requirement from $700,000 a year to $300,000. Preferred stockholders were asked to accept four shares of new common in lieu of their rights to the unpaid dividends. Finally, the company proposed to put an end to the extravagant hopes of its founders by writing off $7,169,000 of trade marks, goodwill and other intangible assets.