In order to cover the matters just referred to, Mr. Speyer agreed in 1898 that the indebtedness of the Central Pacific to the government should be refunded into twenty notes of the railroad company, falling due one every six months, beginning August 1, 1899, and ending February 1, 1909. The notes were to carry interest at 3 per cent per annum, payable semiannually. Taken by itself, this offer was the most liberal that the railroad company had ever made. Yet it represented up to this point only a promise, without security. In order to provide security, Mr. Speyer proposed an additional arrangement, in two parts. By the first part of the additional agreement, Speyer and Company undertook to purchase the four Central Pacific notes earliest in point of maturity, and to pay the face value thereof as soon as received from the government. This obligation of a reputable banking house to pay the substantial sum of $11,762,543.12 was a valuable thing in itself, and materially increased the attractiveness of the whole plan from the government’s point of view. In consideration for its advance, Speyer and Company received new first mortgage bonds of the Central Pacific Railroad, of an issue presently to be described. By the second part of the same arrangement, each note remaining in the hands of the government was to be secured by deposit of first refunding 4 per cent gold bonds of the Central Pacific equal in amount to the face of the note.[588] It will, however, be asked how, in view of the outstanding capitalization of the Central Pacific, it was possible to offer a first mortgage security as collateral for the refunding notes. This was provided for by the further reorganization of the Central Pacific, and by the issue in particular of two new classes of bonds, of which the first was to be a 4 per cent, and the second a 3½ per cent issue, having a first and second mortgage lien, respectively, upon all property of which the Central Pacific was possessed. Reorganization Proposal On February 1, 1899, the outstanding debt of the Central Pacific Railroad consisted of the following issues: Central Pacific Railroad of California, first mortgage bonds $25,881,000 Western Pacific Railroad Company, first mortgage bonds 2,735,000 Central Pacific Railroad Company (San Joaquin Valley branch), first mortgage bonds 6,080,000 Central Pacific Railroad Company, land bonds 2,134,000 Central Pacific Railroad Company, 50-year 6 per cent bonds 56,000 Central Pacific Railroad Company, 50-year 5 per cent bonds 10,245,000 California and Oregon Railroad Company, and Central Pacific Railroad Company, successor, first mortgage bonds 10,340,000