Motion Picture Daily (July–Sept 1938)

Friday, July 29, 1938 MOTION PICTURE DAILY RKO Plan Put Before Court; Hearing Dated (.Continued from facie 1) a plan which "provides a fair equivalent _Mtf any rights the bondholders 1 avf It" is constitutional. FV»#al Judge Henry W. Goddard at the RKO hearing later in the dav fixed Sept. 8 at 10 :30 A. M. in Room 90S of the Federal Courthouse Building for a hearing before Judge William Bondy on the question of confirming the report. The modifications recommended by the special master were first an amendment to Article XI of the charter providing for cumulative voting by common stock ; second, a change in the plan which w'ould make it mandatory on the part of Atlas Corp. to underwrite the purchase of new shares to the extent of $1,500,000; third, a provision giving debenture holders who do not wish common shares the right to receive $140 in preferred shares for each $100 of debentures ; fourth, a provision meeting objections of the United States National Bank of Denver and allowing it certain increases in amount of interest and finally a change in the phraseology of Sub-division e of Article XI of the charter to limit the funded debt to $3,000,000 so long as preferred stock remains outstanding. Feasibility Treated Briefly The report discussed briefly the question of feasibility, and stated that the sole test was whether "the corporation as reorganized will have a sufficiently sound capital structure and sufficient cash to conduct operations in such a manner that it will have a chance to succeed if average business conditions exist." The special master estimated that the parent organization will have $600,000 at the end of the year and in addition $1,500,000 to be acquired from the sale of stock. Against this, he said, there was to be paid only $100,000 on secured notes and the expenses of reorganization. If "extraordinary circumstances" should arise, the report continued, the directors are authorized to create a funded debt up to $3,000,000. RKO Radio Pictures, Inc., now has available $1,500,000 in cash which may be supplemented by short term loans and the theatre companies have at present over $3,500,000, Mr. Alger stated. The amended plan is superior to the old in that it eliminates fixed obligations and substitutes stock, thus meeting the danger of receivership from "occasional lapses in income," the report continued. Called "Substantially Fair" The question of fairness was considered at length, the special master remarking that "mathematical precision is" obviously impossible," but that the allocation under the plan must be "substantially fair." He contended that there was a strong presumption of its fairness because a large percentage of creditors and a majority of the stockholders had approved it. Total assets were estimated at $72,297,075 and the net equity of all creditors and stockholders was $23,212,793, he stated. The 2,365,518 shares of common stock had a book The Government Action (Continued from page 2) , rial shortsightedness as to fail to supply pictures which certain "communities" would support. Speculation inevitably arises on account of this paragraph as to whether the Department of Justice has lent attentive ear to those groups — not communities — which wish to have the entertainment screen perverted from its avowed purposes of entertainment and enlisted in the service of the propagandists who wish to use the medium of great public favor for the propagation of some particular set of notions about social, political and economic reform. On the surface the paragraph seems to say nothing intelligible. A casual glimpse between the lines makes rather plain that what it is all about is in reality a complaint that there has been no opportunity afforded by the companies concerned to those who wish to have their notions of political, social and economic reform masquerade upon the theatre screen as entertainment. At this point the Department of Justice seems to have embarked upon an unexpected course in seeking to tell the industry what kind of subject matter it must produce, an objective which enjoys the sanction of the rule in the totalitarian regimes but appears nowhere that we have ever heard of in the laws or the democratic traditions of these United States. Among the many vitally serious implications of the government's proceeding, several of which must be heartily welcomed as serving eminently constructive purposes, here is one well calculated to create deep concern as to just what influences may be active in the shadowy background of its conception and promotion. value of $9.81 a share, he continued. The objections of the Independent Stockholders' Committee that the debenture holders aggregating $12,718,500 in principal and $4,200,000 in interest who are to receive under the plan one share of preferred stock and five shares of common stock for each $100 of principal, were receiving more than their proportionate share, was overruled by the special master, who stated that he did not agree with the contention that the common stock should be valued at $12.66 a share. The report pointed out in reply that the debenture holders were surrendering a secured debt position for preferred and common stock. Unsecured Creditors Cited As to the $8,000,000 in unsecured creditors who are to receive 10 shares of common stock for every $100 of indebtedness, the special master observed that under the amended plan there were two favorable features for them. One was the acceptance of a stock basis by debenture holders and the other was the preferential right of unsecured creditors to purchase new stock at a price to be fixed by the court. In view of these features and in spite of the fact that unsecured creditors will receive no allotment for interest accruing after Jan. 27, 1933, the special master felt that the allotment was fair. The report recognized that present stockholders would be drastically scaled down, receiving one new share for every six of their present holdings. It stated, however, that creditors were entitled to a priority over stockholders and that in no event could stockholders receive any excess over the remainder after creditors had been provided for. The claim of Rockefeller Center under the amended plan has been reduced from $9,150,628 to $5,000,000, for which the Center is to receive 460,000 shares of common stock, the Para's Half Year Profit $1,225,811 Paramount's estimated earnings for the six months ended July 2 are $1,225,811, after inclusion of $1,165,000 representing the company's share of undistributed earnings for the period from partially owned and unconsolidated subsidiaries, according to a statement issued following the monthly meeting yesterday of the directorate. Earnings for the first six months of 1937 were $3,318,000, exclusive of the company's net interest as a stockholder in undistributed earnings of subsidiaries. This interest, for the first six months of last year, amounted to $980,000, or an aggregate for the period of $4,298,000. Estimated earnings for the quarter ended July 2, last, are $394,945, which includes $359,000 representing the company's share of undistributed earnings for the quarter of partially owned and unconsolidated subsidiaries. Earnings for the corresponding quarter last year amounted to $1,307,000, exclusive of undistributed earnings aggregating $340,000, or a total for the quarter of $1,647,000. To Continue Coast Lab Hollywood, July 28. — Liquidation of assets of International Cinema, Inc., an independent laboratory, will be held up indefinitely. report stated. This allotment was approved by the special master, subject, however, to the fulfilment of a proposed agreement between the Center and the new company providing for the surrender of claims previously recommended for allowance and the granting of a lease of office space for 12 years in the RKO Building at a rental of $2 per square foot per annum. Subpoenas in Federal Suit Served Here (Continued from page 1) out of the city, or members of company boards of directors whose places of business are not those of the several companies' headquarters. Indications are that it will take some time to complete service on all of the defendants. Those served have 20 days in which to file answers to the Government's complaint, but it is believed that most will ask for and obtain an additional 20 days. The corporate defendants who have been served include Paramount Pictures, Inc., Paramount Pictures Distributing Co., Inc., Paramount News, Inc., Loew's, Inc., Metro-GoldwynMayer Corp., RKO Radio Pictures, Inc., Keith-Albee-Orpheum Corp., Pathe News, Inc., RKO Proctor Corp., RKO Midwest Corp., Warner Bros. Pictures, Inc., Vitagraph, Inc., Warner Bros. Circuit Management Corp., 20th Centurv-Fox Film Corp., Movietonews, Inc., 20th Century-Fox Distributing Corp., National Theatres Corp., Chase National Bank, Columbia Pictures Corp., Columbia Pictures Distributing Co., Inc., Universal Corp., Universal Pictures Co., Inc., Big U Film Exchange, Inc., and United Artists Corp. Numerous Individuals Served Among the individual defendants who have been served are, from Paramount, Barney Balaban, Neil F. Agnew, Y. Frank Freeman, John W. Hicks, Jr., Austin Keough, Walter B. Cokell, Stanton Griffis, and several members of the Paramount board of directors. From Loew's, Nicholas M. Schenck, William F. Rodgers, Isidore Frey, Charles C. Moskowitz. From RKO, Leo Spitz, William Mallard, Jules Levy, David Sarnoff, Lunsford P. Yandell, M. H. Aylesworth, Malcolm Kingsberg and Leon Goldberg. From Warners, Albert Warner, Sam E. Morris, Robert W. Perkins, Joseph Bernhard, Gradwell L. Sears and W. S. McDonald. From 20th Century-Fox, W. C. Michael, Felix Jenkins, Herman G. Place, Truman Talley, Spyros Skouras and Herman Wobber. From Columbia, Harry Cohn, Jack Cohn, A. Schneider, Charles Schwartz, Abe Montague. From Universal, J. Cheever Cowdin, Samuel Machnovitch, N. J. Blumberg, Peyton Gibson, Daniel C. Collins, Budd Rogers and W. A. Scully. From United Artists, George J. Schaefer, Harry D. Buckley, Arthur W. Kelly, Dennis F. O'Brien and Edward C. Raftery. Plans Another "Topper" Hollywood, July 28. — "Topper Takes a Trip," a sequel to the "Topper" of last season, will be produced by Hal Roach on his schedule for the current year. It will follow "There Goes My Heart." Sonotone Reports Profit Sonotone Corp., for the six months ended June 30, reports a profit of $101,150 after all charges. This is equal to 12 cents a share on the common stock.