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consideration and in refusing consideration of the bill indicated that no gen. tral program of relief would pass the French Senate without a careful analysis of the company's activities up to that time, and that further administration of the company would be along reorganized lines.'

Accordingly, the Senate and Chamber of Deputies both voted a temporary appropriation of 110,000,000 francs ($4,290,000) in February 1932, in order to cover the estimated deficit of the company's operations for the first half of 1982. This sum was advanced by the French treasury to the company, to be entered on the books of the company as a debt to the French treasury that must be refunded.

On April 9, 1932, a law was passed by the French . Parliament authorizing the Government to guarantee a loan not to exceed 68,748,000 francs ($2,681,17-) for completion of the building program of the Compagnie Générale Transatlantique, the Government to take mortgages on real estate and floating equipment as security for the loan.“

PARLIAMENTARY INVESTIGATION During 1932 the difficulties of the Compagnie Générale Transatlantique were thoroughly aired in the French Parliament. The entire investigation of the company's affairs was subject to study by parliamentary committees and to floor debrates. The debts of the company on July 31, 1932, were, in round numbers, 1,800,000,000 francs ($70,200,000). About 534,000,000 francs ($20,986,200) were well secured. Badly secured debts amounted to 1,272,000,000 francs ($19,986,600), which were written down to about 143,000,000 francs ($5,619,900), so that the total indebtedness of the company remained at about 1,000,000,000 francs ($39,300,000), enough to require 90,000,000 francs ($3,537,000) annually for interest and amortization.

In July 1933, as stated, the French Parliament adopted the proposed Government plant for reorganization of the company. The bill rallied the full support of both houses and the Minister of Merchant Marine, in reporting the proposition, declared that when he assumed office and began to consider the problem of the company, he was faced with a choice between liquidation and national considerations, which resulted in the program finally presented for adoption,

In discussing the proposal the Minister of Marine stated that during the past 20 years the company received an average of 6,500,000 francs ($253,500) for maintenance of service between Havre and New York in exchange for carrying 10,000,000 francs ($390,000) worth of mail, according to rates paid foreign countries for similar services, and in addition transported gratuitously officials and government cargo representing 10,000,000 to 12,000,000 francs a year.

In respect of the Normandie, the minister stated that over 400,000,000 francs ($16,580,000) had already been expended on that vessel. He stated then the new management had reduced overhead and operating expenses by 122,000,000 francs ($4,704,000).

REORGANIZATION Reorganization of the Compagnie Générale Transatlantique was carried out, as stated, under provisions of law of July 20, 1933. The law prohibited the minister of the merchant marine from entering into new agreements with the company unless all provisions of the act were complied with.

The reorganization was to be effected within 4 months and was to be accepted by the creditors, stockholders, and bondholders, and in such a manner that the amount of the company's indebtedness and the new capital together should not exceed the value of the fleet, depreciation being calculated at the rate of 4 percent for cargo vessels, 5 percent for combination passenger and cargo vessels, and 5 percent for passenger vessels, land, buildings, and securities. It was provided also that vessel tonnage should be subject to a reduction of at least 15 percent in valuation, and that the value of the Normandie, then under construction, should be the value of the expenditures made for its construction.

The floating property valuation was to be based at December 31, 1932, and was to be computed in accordance with rules for industrial amortization. The value of the fleet was reduced to 1,057,738,327 francs ($41,252,000), which compares with the valuation of floating and real property at 1,598,681,861 francs ($62,349,000) on December 31, 1931.

1 Trade Commissioner Paul Malone, June 22, 1932, Paris. 2 Journal Official, Apr. 12, 1932.

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Stock- and debenture-holders' meetings were held in September 1933 for the purpose of voting on the new financial organization.

The old capital was canceled with the exception of the A shares at 9,000,000 francs, held by the Government, which were reduced by 60 percent. The shareholders received temporary bonds (actions de jouissance) in place of their shares at the rate of 1 for every old share of 600 francs or 4 of 150 francs. These are voting shares and are entitled to a preferred dividend of 6 francs at the same time as new capital is entitled to a dividend.

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Various debentures were reduced by 60 percent, both as regards interest and reduction of capital.' Amortization was to be resumed on January 1, 1934, and was to be completed on the dates fixed on the original arrangements. As compensation for the loss of 60 percent, debenture holders were to receive: (1) 10 percent of the nominal value of their debentures in B capital shares, and (2) 50 percent of the nominal value of the debentures in beneficiary shares, on the basis of 1 share for 2 debentures of 1,000 francs or 4 of 500 francs.

CREDITORS

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The amount due sundry creditors was 1,695,000,000 francs ($66,105,000).
This was reduced to 1,143,000,000 francs ($44,577,000). Two hundred and eight
million francs ($8,112,000) was paid in capital shares, and 28,000,000 francs
($1,100.000) in debentures with variable income. The terms of settlement of
the remaining 907,000,000 francs ($35,400,000) were to be arranged with each
creditor individually. As compensation for the reduction of 552,000,000 francs
($21,500,000), creditors received beneficiary shares and bonds of variable reve-
nue, or any other authorizations that might be created with a view to making
the financial reorganization possible. It was determined that such beneficiary
shares were to be issued, 1 per 1,000 francs.

The Minister of Finance was authorized under the law to accept a reduction of the credits of the Government to the Compagnie Générale Transatlantique in the proportion at most equal to that of the credits of the same class hield by third parties, but the stocks of the company received by the Government hy way of compensation cannot be transferred without legislative authorization.

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NEW CAPITAL

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Vew capital was authorized at 218,476,950 francs ($8,521,000), including 8.476,950 francs ($331,000), represented by 56,513 A shares of 150 francs, with special voting rights, and 210,000,000 francs ($8,190,000) of B shares of 150 francs each, reserved for the company's creditors and debenture holders. There was to be issued in addition 450,871 temporary bonds (actions de jouissance) without nominal value, which were to be handed over to the old shareholders, and 625,000 beneficiary shares, which the debenture holders and creditors were to receive for reduction in their credits.

The Government was given preferential right to participate in increased capital, and the Minister of the Merchant Marine was officially authorized to assure such services of the company as he might deem necessary, at the expense of, and for the responsibility of the company and the creditors.

Finally, the board of directors was authorized to issue debentures of 150 francs each, with variable income (342 percent minimum, eventually raised to 3 percent through a participation in the profit), reserved for the creditors, and to contract for a loan of 150,000,000 francs in ordinary bonds or debentures, the limit fixed by the same law which also authorized the Minister of Finance to offer the Government's guaranty for the service of the company, and for both the interest and amortization of loans, which were to be negotiated by the company for the purpose of refunding bills which must be paid immediately following the financial reorganization. For the security of any such

* Old capital authorized was 450,000,000 francs ($17,550,000), of which there was outstanding Dec. 31, 1931, 258,000,000 francs ($10.062,000) common stock B and 12,000,000 francs (8468,000) priority stock B.

• There were outstanding Dec. 31, 1932 110.133.000 francs ($4,295,000) in 3-percent bonds : 8,800,000 francs ($343,000) 'in 4-percent bonds : 156,370,000 francs ($6,008,000) in 5-percent bonds; 87,140,000 francs ($3,398,000) in 44-percent bonds.

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guaranties the Government was authorized to accept mortgages on buildings, vessels, and assets of the company.

Distribution of profits. after making all allowances provided in the operating contract, was authorized as follows: (1) 5 percent to A and B shares, plus. eventually, the necessary sum to complete to 5 percent the dividend of the 3 previous years; (2) 6 francs per temporary bond (actions de jouissance) ; (3) 10 francs per beneficiary share. These allowances are to be reduced pro. portionately in case the profit should be insufficient to allow a full distribution, Any balance left after this distribution is to be divided as follows: Foursevenths to the capital shares, one-seventh to the temporary bonds (actions de jouissance), and two-sevenths to the beneficiary shares.

THE GOVERNING BOARD

The law provided that the company must reserve to the Government the right to designate a number of administrators, proportionate to its participation in the capital of the company, and that the number of such administrators may not be less than one-third of the total number. The Government representatives are appointed for a period of 6 years, and have the same rights on the board as other directors. They must send each year to the three ministers interested, within 30 days following the annual meeting, a report of the company's operations during the past year, especially so far as the interests of the State are concerned.

The new board was elected on November 20, 1933, and comprised 18 members, 10 of which were appointed by the Government, 6 elected by the sharehoiders, and 2 representing the sea-going and shore employees. The 10 representatives of the Government were: M. Marcel Olivier, Honorary Governor General of Madagascar; M. Henri Cangardel, shipowner; Messrs. Marraud and Peytral, former ministers: M. Robin, colonial governor: M. J. Marie, of the Merchant Marine Department; Messrs. Haguenin, Baumgartner, Le Bec and Laure, of the Ministry of Finance. Shareholders elected M. Edmond Delirse. naval and shipping editor of the Temps; Admiral Grandclement; M. M. de Groucy, former official of the Finance Ministry: M. Morain, former prefect of police: M. Morard, president of the Chamber of Commerce of Algiers; M. H. du Pasquier, president of the Chamber of Commerce of Havre, and of the Havre Port Authority. The two representatives of the sea-going and shore personnel were not named at that meeting.

Governor-General Olivier was unanimously elected chairman, a position ho held on the provisional board, and . Cangardel was appointed director general, they being, with M. H. du Pasquier, the only members of the old board to be retained.

1933

COMPAGNIE CENERALE TRANSATLANTIQUE CONTRACT OF The 1933 contract between the French Government and the Compagnie Generale Transatlantique is a comprehensive document, comprising (1) a law authorizing the Minister of Merchant Marine to conclude a contract: (2) the agreement; (3) supplement to agreement, covering insurance of the Normandie; and (4) list of duties or regulations annexed to the contraet in 9 chapters. The contract covers the services of the Compagnie Generale Transatlantique between France and North America, between France, Mexico, the Antilles, and Central America, and between Mediterranean France and North Africa.

1. AUTHORITY

The contract was authorized by law of July 20, 1933, which authorized the Minister of Merchant Marine, after financial reorganization of the company, to conclude a contract in behalf of the Government, the contract being allnexed to the law. The enabling act provided that in purchases of equipment by the Compagnie Generale Transatlantique from the highest bidder, the French Workingmen's Associations, represented in a list determined by the Ministers of Labor and Merchant Marine, and organized under the Labor Code, should benefit by the provisions of the decree of October 1, 1931.

5 An interesting statement was attributed to Chairman Olivier at the launcbing of the Normandie in October 1932, when he raised the question of what he termed i “ Washington Disarmament Conference on large, fast, expensive vessels, suggesting that Great Britain, Germany, France, and Italy should seriously consider the enormous cost of the competitive construction of superliners.

Under the budget of 1933 and in the name of the Minister of Merchant Marine, the law opened a credit of 150,000,000 francs ($5,850,000) to be entered under chapter 37b Subvention to the Compagnie Generale Transatlantique." The Minister of Merchant Marine was authorized to pay to the Compagnie Generale Transatlantique a sum of 12,500,000 francs ($187,500) per month over a period of 4 months, beginning with the date of the law, by way of installments on the subvention provided for the year 1933.

II. THE CONTRACT AGREEMENT

BASIS OF SUBSIDY

The basis of the annual subsidy to be paid the Compagnie Generale Transatlantique, under the contract, is the excess of expenditures over receipts under the following limitations :

Total allowed receipts include all revenues except (a) the subsidy payment, lbj receipts from sales of vessels, fixed property or securities, (c) amounts received from underwriters for the loss of or damage to vessels.

Expenditures allowed include all expenditures chargeable to operations, including general expenses of administration and actual overhaul and major repair costs, (b) insurance premiums paid to private underwriters, to insurance funds or to the State, and (c) actual amounts paid for financing charges, including amortization and interest on bonds and debts.

The annual subsidy must not exceed 150,000,000 francs ($5,850,000). If necessary, the services must be reduced to a point where this expenditure shall not be exceeded.

When the deficit is less than 150,000,000 francs ($5,850,000), the difference between the deficit and the authorized maximum amount shall be distributed: (1) On increased amortization and (2) in building up a legal reserve. Increased amortization of mortgages is provided in cases where the company is not permitted to carry a normal industrial amortization for additions made to the initial value of vessels since entry into service, in addition to normal amortization on the average of 4 percent for cargo yessels and 5 percent for combination and passenger vessels. Additional amortization established within conditions approved by the Minister of Merchant Marine in this manner shall be utilized for the repayment of debts to the State.

The constituting of a legal reserve is accomplished in the following manner: When the amount of the deficit, plus the added amortization allowances described above. do not equal a sum of 150,000,000 francs, the annual subsidy shall be limited to the amount of the deficit and amortization, increased by a sum equal to 85 percent of the difference between this sum and 150,000,000 frapes ($5.850,000).

The 85 percent of the total shall be distributed as follows: 2 percent to an administrative bonus, to be divided between executives and administrative personnel, and personnel retirement funds of the company, under conditions established by the Ministers of Merchant Marine and Budget ; 83 percent to top distributed as a dividend to the capital stock, the temporary bonds (actions de Jesuissance), the beneficiary bonds, and to all types of compensation paid for the purpose of better financing, as well as to a supplementary amortization of the floating equipment.

When the subsidy under these conditions is greater than 50,000,000 francs ($1.950.000), stock dividends shall not exceed 5 percent, and dividends to the temporary and beneficiary bonds shall not exceed 1 percent. Reserves shall be lised for the purchase or the construction of ships, and may not exceed 50,000,000 francs ($1,950,000) in 1 year, nor must the total amount of the account, less deduction made for sums thus used, exceed 200,000,000 francs 1$7,800.000) without reducing the subsidy.

As security, the State shall hold liens upon the floating equipment, determined by the various amounts paid on such equipment from the subsidy allowances.

The minimum annual subsidy is 50,000.000 francs ($1,950,000). If allowances previously outlined are less than 50,000,000 ($1,950,000), at least twothirds of the difference between their amount and the total minimum amount if the subsidy shall be paid to a special replacement reserve. The same shall apply to two-thirds of the profit from operation, if the account provided for The subsidy is payable by monthly installments, based on the deficit determined for the year by decision of the Minister of Merchant Marine. At the end of each fiscal year, the subsidy account shall be audited by the Audit Commission for Subsidized Navigation Companies' Accounts.

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Into the special reconstruction reserve shall be carried: (a) Receipts from the sale of fixed property, vessels or assets; (b) sums paid by underwriters to the account of insurance funds for loss or damage to vessels; and (c) special sums previously referred to. Any sum carried to the special reserve may not be used except upon authorization of the Minister of Merchant Marine.

Beyond various fixed limitations, certain of these accounts may be utilized subject to the authority of the Minister of Merchant Marine, in order to complete construction and purchases of tonnage. Loans or security issues are limited to a 25-year period. Loans for completion of the passenger steamer Normandie may be contracted under the guarantee of the State, approved by the Minister of Merchant Marine and subsequent authorization by the Minister of Finance.

REIMBURSEMENT OF 1933 ADVANCES

The contract provides that advances made under earlier laws of 1933 shall be repaid to the treasury from the monthly subvention.

CANCELATION

The contract provides for cancelation, and authorizes the State to take over the operations of the company in such event. (See also p. 39.) Further, the contract specifically cancels the agreement of November 20, 1912, relative to services between Havre and New York, as well as the contract of April 21, 1927, relative to the services between France, Mexico, the Antilles and Central America. The charter party of May 1, 1928, relative to services between France, Algeria, and Tunis is maintained.

SALE OF EQUIPMENT Unless authorized to the contrary by the Minister of Merchant Marine, all sales for over 300,000 francs ($11,700) shall be on a competitive basis, anil shall have the approval of the Minister of Merchant Marine.

III. INSURANCE ON THE “NORMANDIE " (SUPPLEMENT No. 1) Supplement no. 1, attached to the contract provides for the insurance of the passenger vessel Normandie. It specifies that the vessel shall be insured in the market for the maximum amount possible, all or part of which may be reinsured to its equivalent value in foreign exchange at 1 percent. Coverage against all risks carries an exemption of 2 percent, and is of the same type as for other passenger liners of the company, such as the Ile de France, Paris, Lafayette, or Champlain. Insurance contracts are subject to the approval of the Minister of Merchant Marine and the company, and are made with the State as beneficiary.

The company shall cover with its own funds the insurance on a part of the amount, to be determined by agreement between the Minister of Merch:int Marine and the company, upon advice of the Minister of Finance. This sum shall be established from year to year.

The remaining amount necessary to cover the vessel shall be covered from the beginning of construction by a special insurance-credit fund set up with the trust and deposit fund (La Caisse des Depots et Consignations.)

This guarantee is arranged by agreement between the company, Minister of Merchant Marine and Minister of Finance, and shall not exceed total loss or abandonment. It includes the negligence clause, including prohibition of recourse against the master and crew, guarantee against latent defects, sister. ship, clause and, in general, stipulations usually admitted under this type of insurance.

The premiums are payable quarterly, and in case of insufficiency of insurancecredit funds, the State assumes the obligations in the same amount.

Whenever the insurance value of the vessel shall be equal to or less than the total of the sum covered jointly by the market and company insurance funds.

* In view of the difficulties in connection with the total loss and abandonment case of the L'Atlantique, it is interesting to note that the insurance contract provides that if the State considers that repairs are not practicable, this case shall be considered from the insurance point of view as a total loss.

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