The problems as to the recognition to be accorded the relative rights of security holders in pending railroad bankruptcies are the most complex that have arisen since the decision in the Boyd case' focused attention on this phase of reorganization law. This is due not merely to the number of railroads involved, 2 but to the intensity of their financial difficulties. The typical railroad reorganization of the x914-i93o period was, by present standards, not severe. Usually it was carried out

more »

... gh foreclosure of a junior mortgage constituting a general lien upon the bulk of the property of the carrier. Underlying liens, whether divisional or system in character, were commonly left undisturbed. The necessary reduction in fixed charges was accomplished through the exchange of the bonds secured by the mortgage under foreclosure, partly or wholly, for other types of securities-income bonds or preferred or common stock. Then, as now, it was usually necessary to raise funds for rehabilitation of the property and reorganization expenses. Funds were also required for the payment of dissenters. Since underlying liens were normally not foreclosed, it was impracticable to raise these funds by the sale of bonds secured by a first mortgage. New money was obtained by offering to stockholders, on payment of an "assessment," certain of the same rank of securities as went to satisfy creditors' claims, as well as stock in the reorganized company. In order to give stockholders an inducement to pay the "assessment," this was fixed at a figure somewhat less than the estimated market value of the entire package of new securities offered. Under these circumstances, the Boyd doctrine required that a "fair offer" of participation should also be made to all creditors. Hence, the reorganization plan offered something to every class of security holders, although, in *A.B., x923, LL.B., 1927, Harvard University.