14. Receivers

Very often receivers are appointed by a court on the application of creditors, and they, either alone or with the assistance of bankers, devise and secure the adoption of a plan of reorganization. Money may be advanced to them by bankers for which receivers' certificates are given,which are regarded by the courts as a lien on the property prior to that of any class of mortgagees. The money thus advanced is considered necessary to preserve the property and keep the railroad in opera tion, and therefore forms a part of the necessary operating expenditure.

15. Capital Supplied

Generally the concern is sadly in need of a supply of capital. Its credit is gone and money is needed at once to pay for railroad supplies and even wages. The bank advances the capital, sometimes a large sum, to pay the most pressing obligations, to make repairs, in short, to put the concern in a condition to conduct business effectively.

16. Recovery Of Advances

When an advance has been made by a banker, how does he recover it? The method is often quite arbitrary. As all the various parties in interest are desirous of saving as much as they can of their investment, it is assumed that they will all advance some money to save their respective interests. Of course, those who have lost all faith or are unable to advance anything may prefer to let their interest go than to put any more money into the enterprise. Usually, all parties have some hope left, and are willing to contribute something more in the hope of saving all or a part of what they have already invested.

17. Distribution Of Contributions

It is a matter of nice judgment to determine how much to ask the several classes of investors to contribute. Suppose $3,000,000 are needed to make needful improvements and to pay pressing obligations. How shall this sum be apportioned among the different classes of stockholders, common and preferred, and the several classes of mortgagees? It is quite impossible to set forth any principles on which the apportionment is made, because in every reorganization different principles are applied. Sometimes after the plan is worked out and proposed, some class of mortgagees or stockholders object to the amount apportioned to them to pay, and insist so strongly on a readjustment that it is made. But in the end a plan is adopted whereby a contribution is to be forthcoming from several parties in interest, and as soon as this is approved by the court, it becomes binding and effective.

We have assumed that the bank or banker who is thus acting as a reorganizer advances the sum required in advance of the adoption of a plan for reimbursing him, but in truth this rarely happens. He waits until the amount needed is adjusted among the several parties, and then advances the money, and afterward reimburses himself from the fund paid by the stockholders and other parties in interest. If he made an advance before the adoption of a plan, he would in most cases have greater difficulty in securing favorable action thereon. The company's need of money and his willingness to advance it on adequate security are the bases of his action. So long as these exist he dominates over all.

His profit consists of a commission or round sum that is usually fixed in advance and is taken out of the fund thus contributed.