Ann Arbor No. 7, which latter is to be constructed, also the rights of the boat company under its contract with the Manitowoc Shipbuilding Corporation. As further security for the bonds, the lease from the boat company to the railroad company will be assigned by the former to the trustee under the mortgage.

The proposed bonds are to be dated June 1, 1924, and to be in denominations and numbered consecutively as follows: $1,000 bonds, Nos. 1 to 747, inclusive; $500 bonds, Nos. 748 to 837, inclusive; and $100 bonds, Nos. 838 to 917, inclusive. They will bear interest at the rate of 6 per cent per annum, payable semiannually, and will mature annually in lots of 80 of the $1,000 bonds and 10 of the $500 bonds, or $85,000, aggregate principal amount, according to consecutive numbering, on June 1 in each year from 1926 to 1933, inclusive, and in one lot of 107 of the $1,000 bonds, 10 of the $500 bonds, and SO of the $100 bonds, or $120,000 aggregate principal amount, on June 1, 1934. The bonds will be redeemable at 103 and accrued interest. As rental for the two car ferries the railroad company will pay the aggregate amount of $1,096,400 to the trustee under the mortgage, in monthly installments of various amounts as set forth in the proposed lease, beginning with June 15, 1924, and ending with May 15, 1934. The amount so paid will be applied by the trustee to the payment of the interest and principal of the bonds, when and as due and payable. The lease also requires the railroad company to pay certain charges for taxes, insurance premiums, compensation and expenses of the trustee, etc., as provided in the mortgage. By the terms of the lease, the railroad company will also agree to unconditionally guarantee the payment of the principal and interest of the bonds and to indorse its guaranty upon the bonds.

The applicants state that the proposed bonds are to be sold to the Union Trust Company, Cleveland, Ohio, at 90 per cent of par.

The boat company was organized in 1916 under the laws of the State of Michigan. The corporate purposes recited in its articles of association, as amended May 16, 1924, are:

To own, lease, mortgage, sell and transfer a certain Car ferry Steamer heretofore acquired by this Corporation, known as Ann Arbor No. 6; and to acquire, own, lease, mortgage, sell and transfer other Car Ferry Steamers suitable for the transportation of railroad locomotives and cars on the waters of the Great Lakes.

The applicants state that the boat company is not an operating company but a holding company solely, and that it is a subsidiary of the railroad company. As it does not appear that the boat com pany is a "common carrier by railroad," or otherwise a "carrier" within the meaning of section 20a of the interstate commerce act, we are of opinion that we are without jurisdiction over the proposed issue of bonds by the boat company. That part of the application

which is for authority by the boat company to issue bonds will there fore be dismissed.

We find that the proposed assumption of obligation and liability by the Ann Arbor Railroad Company, as guarantor and lessee, in respect of $800,000 of Ann Arbor Boat Company first-mortgage floating-equipment serial 6 per cent bonds as aforesaid (a) is for a lawful object within the corporate purposes of the Ann Arbor Railroad Company, and compatible with the public interest, which is necessary and appropriate for and consistent with the proper performance by it of service to the public as a common carrier, and which will not impair its ability to perform that service, and (b) is reasonably necessary and appropriate for such purpose. An appropriate order will be entered.

ORDER

Entered June 28, 1924

Investigation of the matters and things involved in this proceeding having been had, and said division having, on the date hereof, made and filed a report containing its findings of fact and conclusions thereon, which report is hereby referred to and made a part hereof:

It is ordered, That the Ann Arbor Railroad Company be, and it is hereby, authorized to assume obligation and liability in respect of $800,000, principal amount, of Ann Arbor Boat Company first-mortgage floating-equipment serial 6 per cent bonds, which are to be issued by the Ann Arbor Boat Company under and pursuant to, and to be secured by, a mortgage to be made by the Ann Arbor Boat Company to the Union Trust Company, Cleveland, Ohio, under date of June 1, 1924, (a) by entering into a lease with the Ann Arbor Boat Company under date of June 1, 1924, covering two car ferries, one known as Ann Arbor No. 6, and the other to be known as Ann Arbor No. 7, thereby agreeing, among other things, to unconditionally guarantee the payment of the principal and interest of the aforesaid bonds and to pay to the trustee under the aforesaid mortgage, as rental, the aggregate amount of $1,096,400, in monthly installments of various amounts, such monthly payments to be applied by the trustee, so far as necessary, in payment of the principal of and interest on said bonds, and also to unconditionally guarantee the payment of such principal and interest by written indorsement on the bonds, and (b) by indorsing on each of said bonds its unconditional guaranty of the payment of the principal thereof and the interest thereon; said mortgage and said lease to be substantially in the

forms submitted with the application; said bonds to be dated June 1, 1924, to bear interest at the rate of 6 per cent per annum, payable semiannually, and to be in denominations, to mature, and to be redeemable as set forth in the application and the aforesaid report; said bonds to be sold at not less than 90 per cent of par and accrued interest, and the proceeds to be used in the procurement of said car ferry to be known as Ann Arbor No. 7.

It is further ordered, That, except as herein authorized, said bonds shall not be sold, pledged, repledged, or otherwise disposed of by the Ann Arbor Railroad Company, unless and until so ordered by this commission.

It is further ordered, That the Ann Arbor Railroad Company shall report concerning the matters herein involved in conformity with the commission's order dated May 25, 1922, respecting applications filed under section 20a of the interstate commerce act.

It is further ordered, That nothing herein shall be construed to imply any guaranty or obligation as to said bonds, or interest thereon, on the part of the United States.

And it is further ordered, That that part of the application for authority by the Ann Arbor Boat Company to issue said bonds, be, and it is hereby, dismissed.

90 I. C. C.

FINANCE DOCKET No. 4010

CONTROL OF CALIFORNIA SOUTHERN R. R. BY ATCHISON, TOPEKA & SANTA FE RY.

Submitted June 12, 1924. Decided June 27, 1924

Acquisition by the Atchison, Topeka & Santa Fe Railway Company of control of the California Southern Railroad Company by purchase of capital stock approved and authorized.

Lee F. English for applicant.

REPORT OF THE COMMISSION

DIVISION 4, COMMISSIONERS MEYER, EASTMAN, AND POTTER BY DIVISION 4:

The Atchison, Topeka & Santa Fe Railway Company, a carrier by railroad subject to the interstate commerce act, on May 7, 1924, filed an application under paragraph (2) of section 5 of the act for an order authorizing it to acquire control of the California Southern Railroad Company, a corporation organized for the purpose of engaging in interstate commerce by railroad, hereinafter called the California Company, by purchase of all of its capital stock, excepting directors' qualifying shares. The Railroad Commission of the State of California, on April 23, 1924, entered an order approving the proposed acquisition. A hearing has been had and no objection to the granting of the application has been presented to us.

The railroad of the California Company extends from a connection with the applicant's line at Rice, San Bernardino County, in a general southerly direction to Ripley, Riverside County, a distance of 49.85 miles, all in the State of California.

The California Company has outstanding $213,000 of first-mortgage bonds, $247,000 of second-mortgage bonds, and $162,500 of capital stock, consisting of 1,625 shares of the par value of $100 each. All the bonds and all the capital stock, excepting five shares held by directors, are owned by the Santa Fe Land Improvement Company, hereinafter called the land company, which acquired the securities for $619,452. The applicant owns all of the capital stock of the land company, except directors' shares, and operates the railroad of the California Company under a lease, pursuant to authority granted by our order in Lease of California Southern R. R. by A., T. & S. F. Ry., 70 I. C. C. 514.

The applicant proposes to purchase the capital stock of the California Company, now owned by the land company, for $159,452. The consideration to be paid represents the amount paid by the land company, less the principal amount of the outstanding bonds. No market value for the stock has been established. The applicant estimates its value at $307,290.33, which amount represents the difference between the investment in road and equipment, less depreciation, and the unmatured funded debt. The applicant will also acquire all the bonds of the California Company for $460,000. The purpose is to reimburse the land company in full for its investment in the securities of the California Company. Because of the interrelated character of the three companies no cash payment is involved, the transaction being merely one of bookkeeping. It is represented that no useful purpose is served by having the capital stock held by the land company, and that it will be in the public interest to vest the ownership of the stock in the applicant, which is the lessee and operator of the railroad. This will simplify the intercorporate relations and will relieve the land company from the necessity of carrying the accounts of the California Company on its books.

Upon the facts presented we find that the acquisition by the applicant of control of the California Company by purchase of capital stock, under the terms and for the consideration set forth in the application, which we find to be just and reasonable, will be in the public interest. An order will be entered accordingly.

COMMISSIONER EASTMAN dissents.

ORDER

Entered June 27, 1924

A hearing and investigation of the matters and things involved in this proceeding having been had, and said division having, on the date hereof, made and filed a report containing its findings of fact and conclusions thereon, which said report is hereby referred to and made a part hereof:

It is ordered, That the Atchison, Topeka & Santa Fe Railway Company be, and it is hereby, authorized to acquire control of the California Southern Railroad Company by purchase of the capital stock of that company as described in the application and report aforesaid.

90 I. C. C.