[[p. 1278]] Mr. Editor,--The excessive complication of the affairs of this railway, and it having ceased for a time to pay the coupons of its mortgage bonds, appears to have had the effect of frightening investors, although its prospects are at this moment really brighter than they have been for years. Peculation and financing are now stopped; the line is in the hands of a receiver appointed by the American courts and its revenues will be [[p. 1279]] fairly applied to improve its condition and to pay its Bondholders in their legal order of priority.

     The wordy war which has for some time been carried on in the "Money Market Review" and other papers, as to the priority of the debentures over the consolidated bonds, and as to the validity of the latter, seems to have prevented persons from perceiving the real value of the former securities quite independently of all these legal questions as to their respective priorities.

     The debenture holders possess a valuable security in the hands of trustees, which at the lowest valuation will produce far more than the present price of the debentures.

     To ascertain the actual value of this property in trust we must refer to the "Report of the Committee of Investigation," and to that of the receiver. The Committee of Investigation have been accused by Mr. Kennard, the engineer of the line, of having made out the line to be worse than it is, and they certainly do not appear to have flattered it. They tell us, however, that a careful investigation on the spot has satisfied them that it will require a sum of four million dollars, spread over four years, to complete the construction and make all necessary renewals. The receiver’s report for the first six months (up to September last) has been issued, and from it we learn that the net profits of the road during that period has been $951,569, which has been applied as follows:--Renewals, $477,349; construction, $395,932; debts paid, $78,288. With an improved road, more rolling stock (on which $93,000 has been spent), and the last splendid American harvest, we may fairly look to increased traffic and larger profits, in which case the road may be put in complete order in two years out of its own earnings, after which those profits will be set free for the payment of its mortgage coupons, current and deferred.

     Now the total amount in currency required to pay the whole interest on the first and second mortgage bonds (at the present value of gold), is a little over one million dollars, or hardly more than half the profits the line is even now making. It is evident, therefore, that even allowing a large margin for the future of several hundred thousand dollars per annum for renewals to keep the line in good working order, there will still be ample funds to pay the first and second mortgage coupons, and a large balance for the deferred coupons, and whatever may claim next after them.

     The debenture trust possesses $3,854,000 of first and second mortgage bonds, the coupons on which amount to £51,923 per annum; equal to £1 17s. per cent. on the whole debenture debt.

     The trustees hold also cash and other securities immediately realisable as follows:--

Oil Creek share dividends, 20 per cent. (cash in hand) . . . . . £39,000
Oil Creek shares, $50,000 (at a high premium), about . . . . . £10,000
Oil Creek bonds, $331,000 (worth par, or nearly) . . . . . £47,280
New Lisbon first mortgage bonds, $300,000 (price unknown), and Erie and Niagara first mortgage bonds, $250,000 (price unknown), but putting them as low as 25, will produce . . . . . £20,000

[[total]] . . . . . £116,280

Making over £116,000 which may be at once realised and divided among the debenture-holders, giving them £4 12s. per £l00 debenture.

     A careful estimate shows that the trustees have further the large amount of £173,000 worth of coupons accumulated during the three years of their trust, but which they have neglected to present for payment. These will be further increased by May, 1869 (when there is a fair probability of their being paid), to about £260,000, or £9 5s. per £100 debenture.

     A purchaser of debentures at present quotations will stand thus--he will probably receive in a month or two £4 12s. per £l00, or one-fifth of his purchase money. In a year and a half or two years he will begin to receive interest from his share of the mortgage bonds pledged, amounting to £1 17s. per £l00, or 8 1/2 per cent. on his purchase money. About the same time, or perhaps a year later, he will receive his share of the deferred coupons, which will be at least £9 5s. per £l00, or 42 per cent. on his purchase money.

     Combining these results, we find that a purchaser of debentures is almost sure to get back 63 per cent. of his money within two years of this time (part immediately), and on the balance (£8 3s. per £l00 debenture) will receive at the rate of 22 per cent. interest, while the bonds that produce this interest will be daily increasing in value and must soon approach par, when they will return him at least one-third more than all the money he at first invested.

     Now, I particularly wish your readers to mark this, that although these results are not absolutely certain, yet it is absolutely certain that all this must happen before the consolidated bondholders receive one penny. Whether the scheme of the committee of investigation or any other scheme be carried out, this must be its first result, because the priority of the first and second mortgage bonds is indisputable, and we have, so far, taken into account nothing but first and second mortgage bonds.

     But the moment the consolidated bondholders get anything the debenture holders get more than all this, for they possess $1,382,000 Buffalo extension bonds for which they can claim consolidated bonds in exchange, and they have further near two million of Atlantic and Great Western preference bonds, which will certainly have a value whenever the consolidated bond coupons are all paid.

     The facts and figures here stated are well known to all concerned, but they do not seem to have drawn the fair inference, that debentures are dirt cheap at present prices, and that consolidateds are proportionately very dear. If a consolidated bondholder is hopeful of the railway, he must see that the debenture holder will get paid in full, with a large bonus, by the time he begins to get interest. If he is despondent of the railway, it is still more clear that the debenture holder must get a good deal, while he will got nothing. Why does he not exchange?

Alfred R. Wallace.