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Mr. LAMBERT. No; not a single thing. The CHAIRMAN. There is on the statutes of the District of Columbia a law introduced by Senator La Follette which prohibits mergers.

Mr. LAMBERT. No; it simply prohibits the holding of 20 per cent or more of the capital stock of a public utility local corporation by any other public utility corporation or holding corporation.

The CHAIRMAN. Yes.

Mr. LAMBERT. That is all. But any bank or any individual or any group of individuals can come in and buy the whole 100 per cent and there is no law to interfere with them in the slightest degree.

Senator COPELAND. Does the Public Utilities Commission have regulatory power over you as regards the rate you shall charge? Mr. LAMBERT. Yes. Senator COPELAND. And the amount of profits you may make? Mr. LAMBERT. Yes.

Senator COPELAND. And I suppose they now have the right to go in your office and see how things are going?

Mr. LAMBERT. Yes; they do it now.

Senator COPELAND. And so the only thing, so far as the financial structure is concerned, that is changed is that you are taken out of the old act of Congress and the power is transferred from Congress, so to speak, to the Public Utilities Commission to direct you in any setup that you may make as regards new financing?

Mr. LAMBERT. And in that connection, of course, referring to the minority suggestion made awhile ago, the minority stockholders would be protected in having their right, the same as the majority stockholders, to subscribe to any additional stock at the rate which the Public Utilities Commission fixed.

Senator Rossion. According to these statements, then, any time you want to make a change in this company, you must come to Congress.

Mr. LAMBERT. We must come here.

Senator Rossion. It would seem to me a similar amendment could be prepared putting it under the general code here. Mr. Lambert. That

is what we think we have done.
Senator COPELAND. That is the purpose of the bill, is it not?
Mr. LAMBERT. Yes.
Senator ROBSION. That is, this particular company?
Mr. LAMBERT. You mean as to all companies?

Senator Rossion. It has been argued here that all other companies have the rights you are seeking. Is not that what you claim, Mr. Lambert?

Mr. LAMBERT. I do not claim that. I do not say all other companies have such rights.

Senator Rossion. In answer to Senator Copeland, of New York, you said we had to do this because this company was in a class by itself because of the charter granted in 1848.

Senator COPELAND. It is not in a class by itself, as I understand it, Senator, so far as regulation is concerned, but the Public Utilities Commission is helpless and the company is helpless jointly to set up any new structure because they are operating under what we would call a government charter.

Senator Rossion. That is the point I am making: If it is different from the others and the other companies have certain rights, a simple

amendment putting it under the general code, so they would not have to come to Congress every time they wanted to make some change, but making it subject to the general law, the same as all other concerns, would accomplish it.

Mr. LAMBERT. That is what we have done here in one feature of this bill where we have said “amend its charter so as to make any such change” subject to subchapter 4 of chapter 18 of the Code of Law for the District of Columbia as amended June 7, 1924.

Senator COPELAND. That is on page 5.

Senator ROBSION. If that should be passed would not that be all that was necessary?

Mr. LAMBERT. It might not with this charter coming down from ancient history, as it does. We do not want to do it halfway; we want to accomplish what we start to do.

Senator ROBSION. If that amendment is good for the future, then it would be good now, wouldn't it? If it would not be good new, it would not mean anything for the future, it seems to me.

Mr. LAMBERT. It has to be good for both.

Senator COPELAND. I am anxious to know, Mr. Chairman, if the Public Utilities Commission approves this bill and if they feel all the rights of the stockholders and of the citizens and the public have been preserved by the language used in the bill. That is what is in my mind. What does the commission say about that? I do not want to sweep you off the floor. Mr. LAMBERT. I would like to hear from General Patrick.

General PATRICK. As provided by the law, Senator Copeland, the commission held a public hearing, considered the bill and heard everyone who appeared before it concerning all the features of the bill.

There was very little opposition.

The people's counsel was present at the hearing and had an opportunity to examine witnesses. The commission itself studied the bill.

Answering your question as clearly as I can, the commission is convinced that the rights of all parties concerned, including the minority stockholders and including the public of Washington, are amply protected by the provisions of the bill as drawn.

The CHAIRMAN. Mr. Lambert, you say Vr. Burroughs wishes to be heard?

Mr. LAMBERT. Yes, I would like to have Mr. Burroughs answer some of your questions.

Senator COPELAND. Has there been opposition to this bill?

The CHAIRMAN. No. There has been quite a little comment in the newspapers about this transaction.

Senator COPELAND. They are inquiring into the significance of it, I think.

The CHAIRMAN. Yes.

STATEMENT OF FREDERICK S. BURROUGHS, TREASURER OF THE

SEABOARD INVESTMENT TRUST

The CHAIRMAN. Mr. Burroughs, I assume you are more closely associated with this enterprise than anyone here, and you have just entered the picture. We would like you, in a short statement, to tell

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the committee what has been going on so far as these gas properties are concerned, what it means, and why the company thinks this legislation is necessary.

We would like to know more particularly what other utility interests this company is associated with and what holding companies or operating companies you are connected with, why this program has been developed here in Washington, and what you expect to do with the property that you have just recently taken over.

What is your official position so far as this company is concerned?

Mr. BURROUGHS. Well, so far as this company is concerned, I am treasurer of the Seaboard Investment Trust, which owns a majority of the stock of the Washington Gas Light Co.

The CHAIRMAN. Is that a holding company?

Mr. BURROUGHS. No, sir; that is a common-law trust that we formed to acquire and hold this stock.

The CHAIRMAN. Now, there is a holding company somewhere, is there not, that has some interest in this enterprise?

Mr. BURROUGHS. No, sir; there is no holding company that is interested in this. I formed a group to acquire control of this.

Senator COPELAND. Do you live here?

Mr. BURROUGHS. No, sir; my office is in New York, with Harris, Forbes & Co., and my residence is in New Jersey.

I formed a group of bankers to acquire the controlling stock of the Washington Gas Light Co., and, as Mr. Lambert has told you, we acquired something over 108,000 shares of a total of 130,000 shares.

The Washington company owns the entire capital stock, except directors' qualifying shares, in the Georgetown Gaslight Co.

We feel that there is an unnecessary duplication of expense in maintaining those two companies; that inasmuch as it is a common ownership we might as well have it all one company. We have calculated that we are throwing away maybe $50,000 a year by maintaining a separate corporation of the Georgetown company.

So this bill provides for the elimination of the Georgetown company as a separate corporation and having all the operations within the District in the one company. The ownership is common now, and all we propose to do is to eliminate this subsidiary.

Senator COPELAND. Mr. Burroughs, is every share of the Georgetown company owned by the Washington company?

Mr. BURROUGHS. All except, I think, five shares, or something like that.

Senator COPELAND. The directors' qualifying shares?

Mr. BURROUGHS. Yes. Those directors' shares are also owned by the company, but they stand in the name of the directors. There is no diversity of ownership.

Senator COPELAND. So from that organization there would be no opposition?

Mr. BURROUGHS. Oh, no. It is a wholly owned subsidiary.

Now, the reason for suggesting a change of capitalization is that the Washington company has been forced to finance its development to date through the issuance of bonds, increasing the debt.

Senator ROBINSON. Bonds to what amount?
Mr. BURROUGHS. There are $11,000,000.

Senator ROBINSON. $11,000,000. What is the par value of all the stock of both kinds?

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Mr. BURROUGHS. One hundred and thirty thousand shares of stock, which represents the equity ownership of this property. That stock has a par value of $20 a share. There is, however, an important surplus in the company which, of course, also belongs to the common stock.

Senator ROBSION. How much debt is there?

Mr. BURROUGHS. I could not tell you offhand. I will have the treasurer tell you.

Senator Rossion. Is there somebody here that knows? I want to get that in there.

Mr. BURROUGHs. I will be glad to submit a balance sheet and that will fully inform you.

Senator RobSION. Well, that one question could be answered now. Mr. BURROUGHS. $7,473,000. Senator Rossion. $7,473,000 surplus? Mr. BURROUGHS. That is in the Washington company alone. That does not include the ownership of the subsidiaries, the subsidiaries being the Georgetown Gaslight Co. and two or three small companies outside of the District.

Senator RobSION. How many bonds have been sold?

Mr. BURROUGHS. About $11,000,000, and there is about $2,000,000 of floating debts, bank loans, which is unfunded at the present time.

Senator Robsion. Are there any other bonds authorized besides the $11,000,000?

Mr. BURROUGHS. Those bonds are a closed issue and they are noncallable. There is absolutely no way at this time that this company can raise a dollar of additional capital to provide for extensions unless it can sell preferred stock or additional common stock, or unless it borrows, and its borrowings must be junior to the approximately $10,000,000 or $11,000,000 now outstanding, and that $11,000,000 of bonds now outstanding, furthermore, are noncallable by their terms, so you can not get rid of those and make a larger authorized issue.

Senator RobSION. If this bill would pass, would it authorize the issue of more bonds?

Mr. BURROUGHS. No; this would not have anything to do with bonds, but it would permit the company to go to the commission during times when Congress is not in session and get authority to issue more securities in the form of preferred stock or common stock, as the commission saw fit, to be sold to raise money to provide for extensions and raise money to pay for the floating debt that the banks are now carrying.

The CHAIRMAN. Anything they do in the way of issuing bonds or any other securities must first have the approval of the Public Utilities Commission?

Mr. BURROUGHS. Yes. The company could now go to the commission and secure permission to issue additional bonds, but you are impairing the quality of the bonds if you do not put in equity money.

That is, if the stockholders do not supply more money the bonds are constantly getting poorer, because there is a larger percentage of debts.

Senator ROBSION. Who sold these bonds? Did you engineer the sale?

Mr. BURROUGHS. My house has sold some of them, not all of them. Most of them have been sold to the public. I think we have underwritten some issues.

Senator Rossion. What price did you get?
Mr. BURROUGHS. I could not remember.
Senator Rossion. Did they sell for less than par?

Mr. BURROUGHS. I do not remember. I am told $100 for the A and $101 for the B.

Senator ROBSION. What rate did they bear? Mr. BURROUGHS. Those are 10-year 6 per cent bonds. Senator Rossion. Now, you have in mind the amount of stock which you expect to issue, either of preferred or common, in the near future, have you not? You have figured it out, have you not?

Mr. BURROUGHS. No, sir; we do not have it in mind. As the company needs additional capital to build mains and provide additional services as the city grows, we want some way by which we can raise the money, and under the present circumstances there is no way without waiting for direct action by Congress.

Senator Rossion. What was the necessity of this $11,000,000 of bonds if the company has $2,600,000 par value and $7,473,000 of surplus.

Mr. BURROUGHS. Well, it has $30,000,000 or $40,000,000 worth of property. It has invested something over $30,000,000 in the Washington company alone, as I recall it.

Senator ROBSION. And this $11,000,000 was to take care of debts against the company?

Mr. BURROUGHS. To provide part of the money with which the plant was built.

Senator RobsION. That was to cover debts or claims owed by the company.

Mr. BURROUGHS. It does not cover debts. A company has to raise money by one of two ways, either through the sale of bonds, which is its borrowings

Senator ROBSION. Well, make it the obligations of the company. Mr. BURROUGHS. To raise the capital to build the property. That is why it was issued.

Senator ŘOBSION. Those things are obligations.

Senator COPELAND. I suppose these bonds which are outstanding are the successors of various bond issues in the past that go back originally to the construction of the plant.

Mr. BURROUGHS. Yes. It is a very old system and as it has grown from time to time additional stocks and bonds have been issued. Now, there were some 50-year bonds that were issued sometime ago—I don't remember when; there are $2,500,000 of those outstanding. Then there are $4,000,000 of so-called series A, 6 per cent second-mortgage bonds.

Senator ROBSION. Are all of these bonds due or about to become due? Mr. BURROUGHS. Not for some time. There

no early maturities.

Senator Rossion. What did you pay for this stock?

Mr. BURROUGHS. We acquired part of it privately and part of it we acquired by general offer to the stockholders at $125 a share.

Senator ROBSION. Can you tell about the average?

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