12Q CORPORATION FINANCE
When the Strutbers Wells Titusville Corp. had accumulated arrearages
of $36.75 on its $lOO-par 7 per cent preferred stock, the arrearages were
eliminated and the company's capital account revamped by securing the
approval of a substantial majority of the stockholders to a plan that
exchanged each share of existing preferred stock and arrearages for five
shares of new $1.25 cumulative preferred stock, with a liquidating value of
$25, and one share of common stock currently selling at about $31 per
share. The new preferred stock is convertible into common, share for
share, for a period of 5 years. Taking a cue from the practice of issuing
adjustment bonds in the case of reorganizations, the Denniwm Manufac-
turing Co., in order to eliminate an accrual of $38.50 per share on its 7 per
cent $100-par, cumulative preferred stock, issued 300,000 shares of no-par
adjustment stock. Each share of preferred stock was to be exchanged
for one share of $7 no-par preferred, the dividends to be cumulative only
if earned, and four shares of adjustment stock. Each share of ("lass A
stock was entitled to be exchanged for one share of adjustment stock. Rvon
income bonds have occasionally been used to fund accumulated dividends.
In 1937, the Columbia River Paper Mills offered $140 in 5 per cent income
bonds, maturing in 30 years and callable on any interest date, in exchange
for each $100 of preferred stock.
ALTERNATIVE PLANS.—In the recapitalization that has as its objective
the funding of accumulative dividends on preferred stock, various plans
are utilized, including some that give alternative choices. The holders
of the 7 per cent preferred stock of the Nashua Manufacturing (Jo., with
dividends in arrears of $45.50, were offered in exchange, share for share,
$5 cumulative convertible Class A preferred stock. In the funding of the
accumulated dividends, the plan proposed a payment of $3 in cash as soon
as the earnings permit and the remainder before 1938, in cash or in $5 non-
cumulative convertible Claws B preferred stock. Each share of Class A
was to be convertible into one share of common stock anil each share of
Class B into one and one-fourth shares of common. Each was callable at
$105 per share.
SIMPLE SOLUTION.—When the Converse llubbor Co. had accumulated
$12 per share in unpaid dividends on its $33-par preferred ntork, the common
stockholders requested that the, dividends be funded and offered a very
simple plan to accomplish the purpose; viz., the issuance of $45-par pre-
ferred atock and its exchange, share for share, for the $33-par stock and the
$12-dividcnd accumulation. This plan has possibilities. With the consent
of the preferred stockholders, it might be used every time preferred dividends
accumulate. Meantime, with the preferred arrearages "taken care" of, there
would be no obstacle to the declaration of dividends on the common stock.
Attitude of Shareholders.—The attitude of shareholders toward exchang-
ing preferred shares and accumulated dividends for lower dividend securities