——————————— Total $57,471,000 Under the proposed reorganization plan, the aggregate of $57,471,000 of securities listed was to be retired in exchange for $51,253,500 in new 4 per cent bonds, $13,695,000 in new 3½ per cent bonds, and $1,987,383.70 in cash. Generally speaking, the outstanding first mortgage bonds were offered par in new fours, with a slight bonus in new 3½ per cents. Junior mortgages received 50 per cent in new fours, and from 70 to 90 per cent in new 3½ per cent securities. After the retirement of outstanding first mortgages, the 4 per cent bond issue was then to be increased further by the amount necessary to provide the government with the collateral stipulated for in the negotiations. Thus the government was set on a par with outstanding first mortgage bondholders. Here, however, was a real difficulty. It was plain that while the old first mortgage bondholders might consent to the retirement of the issues which they held by exchange for new bonds, on the terms stated, they would yet hesitate to allow the inflation of the first mortgage issue by putting out $58,000,000 first mortgage bonds over and above the amount of their holdings in order to satisfy a government claim hitherto secured only by a second mortgage lien. It must be remembered that the reorganization was a voluntary one, requiring for its success the free consent of all parties. Some additional considertion had to be offered at this point in order to satisfy first mortgage bondholders. It was at this juncture that the Southern Pacific Company stepped in, with a guaranty on both the new 4 per cent and the new 3½ per cent issues. The additional security provided by this guaranty was without doubt an element contributing strongly to the successful carrying out of the proposed exchanges. At the same time the guaranty was received with favor by the government, because it increased the government’s security as well as that possessed by former bondholders.