American Telephone and Telegraph Com pang has 4 per cent debenture bonds, due March 1, 1936, outstanding to an amount of n2,724,000 out of an original issue of $150, 000,000. They are convertible into common stock at 126.44 before March 1, 1918, and are redeemable after March 1, 1914, at 105. The company cannot create any mortgage, or any collateral trust indenture covering securities now owned, or purchased with proceeds of these bonds, without including these bonds as also secured on the new assets. During the term of the bonds the company cannot have outstanding unsecured bonds or notes in ex cess of $150,000,000, except obligations pay able within one year not exceeding $10,000, 000, unless additional money from the sale of stock shall be paid into the treasury, in which case the company may issue additional unse cured bonds or notes to an amount equal to the money paid in. So the bondholders again in this case exercise control to the extent of limiting the debt-creating power of the share holders.
Bondholders of the Westinghouse Electric and Manufacturing Company exercise con trol in many directions. The company has an issue to the authorized amount of $20,000, 000 of 5 per cent bonds, due January 1, 1931, convertible into assenting (now common) stock at 200. These are debenture bonds and contain a covenant that no mortgage shall be placed on the properties described in the trust indenture. The company cannot issue notes in addition to the outstanding $6,000, 000 except against after-acquired securities of the appraised value of 120 per cent of the new notes issued. It cannot issue further bonds unless net earnings are at least double the in terest charge of the company and its subsid iaries, including the securities proposed to be issued. The company may issue these bonds, up to an amount of $5,000,000, beyond the $20,000,000 immediately authorized, equal in amount to the proceeds paid in from the sale of new stock. Quick assets must equal the aggregate amount of indebtedness, including the indebtedness of subsidiary companies ex clusive of collateral notes. Indebtedness out side of the bonds cannot exceed 25 per cent of the par of the bonds outstanding. The company cannot issue any stock entitled to preference over the assenting (now common) stock, It cannot sell any stock for less than 10 per cent below the market price of the assenting (now common) stock.
Chicago Bell Telephone Company first mortgage 5 per cent bonds, due December 1, 1923, $5,000,000 outstanding, $50,000,000 authorized, carry control in several respects : 1. The company cannot issue bonds additional to the $5,000,000 for one year after their issue; then not in excess of $5,000,000 per annum. Such a provision is common. It is an assurance to the underWriters or pur chasers of the security that the company will not throw more bonds on the market within a given period. This gives time for the public
to absorb the issue, and guards against the price-depreciating influence of an additional supply of the security, which is particularly acute if the first amount issued is not fully ab sorbed. It also gives the corporation a chance to get the benefit of the capital raised by the bonds already issued and reflect it in larger earnings, so that the price of the security will not be further depressed by lowering the percentage of earnings above fixed charges. 2. Total outstanding bonds of the company must not exceed 50 per cent of the value of its property, or 60 per cent of the value of its real estate. 3. After the company has $15,000,000 of these bonds outstanding, it cannot issue further bonds to exceed 75 per cent of the cost of additional improvements and extensions.
Of the Nashville (Tennessee) Railway and Light Company Refunding and Extension 5's, due July 1, 1955, $2,000,000 are issued, $6,000,000 are reserved to retire underlying bonds, and $7,000,000 are issuable only: (1) For 80 per cent of the cost of improvements and additional property acquired since Janu ary 1, 1908; also on condition that (2) the outstanding bonded debt must not exceed five times gross earnings for previous twelve months; (3) net for previous twelve months must equal at least one and one half times total interest charges; (4) at least 10 per cent of gross earnings for the preceding twelve months must be expended for maintenance and included in operating. Birmingham (Ala bama) Light and Power Company 6's contain similar provisions.
York (Pennsylvania) Railway 5's, due De cember 1, 1937, authorized to the sum of $10,000,000 and outstanding to the amount of $3,400,000, stipulate: "Of the balance of the bonds $2,000,000 are reserved for the specific purposes provided in the mortgage and the remaining bonds, $4,600,000, can only be issued at the cost price of the purposes specified, provided the net earnings, after payment of all interest and taxes for twelve months prior to the date of issuance, shall be at least equal to interest and taxes for one year on all outstanding bonds and any or all of the purposed additional bonds." As another example of control vested in bonds for the purpose of limiting the power of the shareholders to create debt, the Na tional Enameling and Stamping Company has authorized and outstanding $3,500,000 refunding, first mortgage real estate, sinking fund 5's, due June 1, 1929, which provide that the liquid assets of the company must at all times equal the aggregate debts of the company, including outstanding bonds of this issue.