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Aid was asked from Reconstruction Finance Corp. The I. C. C. refused to pass a plan by which R. F. C. would lend the road enough to pay bondholders 50% in cash, laid down a plan by which they were offered 25% in cash, 75% in three-year 6% notes. Last week on the day that the old notes fell due only 71% of their holders had assented to the offer. For the first time since the Wabash defaulted interest after it was in receivership (TIME, Dec. 14) a major U. S. railroad was in default. A receivership action was promptly started by a note-holder.
If the Nickel Plate goes into receivership and is reorganized, a new angle to current railroad problems will arise. Its control of the Wheeling has been pledged to R. F. C. as security on a loan. Calling of this loan would apparently bring about the first Federal ownership of an important railroad.
Last March the Missouri Pacific, an-other Van Sweringen road, was loaned $12,300,000 bv R. F. C. Half the funds went to repay J. P. Morgan & Co. half of a note they held. This deal excited hot words in Congress (TIME, April 11). Last week the loan fell due, was renewed for a year.*
Oris Paxton Van Sweringen, 53, and his two-year-younger brother Mantis James were at home in Cleveland last week, silent as to what they thought of the Nickel Plate's situation. Quiet, busy bachelors who live together in the fashionable Shaker Heights district which they built up, the "Vans" have always been shy of publicity. But many a success writer has written of their rise from newspaper selling with pooled assets of $16.32 to a position where they control 29,704 miles of track with Cleveland's new Union Terminal as their monument. The Depression has brought a severe strain on the holding companies which bind their empire and there has been many a rumor that they have lost control. Once, when such reports were at their height, Brother Mantis was off duckshooting and Brother Oris was calmly addressing New England Governors on the way he would like to see consolidation come about (TIME, Nov. 3, 1930). Dexterous financial management and the strong backing of J. P. Morgan & Co. and the George Fisher Baker interests have apparently enabled the "Vans" to resist the forces of disintegration.
If a receivership and reorganization of the Nickel Plate occurs it is likely that the only way common stockholders can retain control is through an assessment. Last February control of the Nickel Plate was shifted under option from Alleghany Corp., loaded down with bank loans, to Chesapeake & Ohio Railway, which at the end of last year had $11,000,000 in cash and cash deposits. Despite the Nickel Plate's situation, its common shares sold last week at $5, indicating most people thought the stock would not be wiped out, that the "Vans" could patch up their pyramid. And announcement of their interest in the Seatrain showed that the Brothers were still aggressively in the railroad business.