This section is from the book "Business Finance", by William Henry Lough. Also available from Amazon: Business Finance, A Practical Study of Financial Management in Private Business Concerns.
The first of these remedies is unusual, except among the creditors of small corporations. It requires a degree of harmonious action that is almost impossible to bring about among a great number of people. The attempt, however, was. made in July, 1915, in the case of the Missouri Pacific-Iron Moun-tain system under the auspices of one of the great banking houses of America, Kuhn, Loeb and Company, who acted as readjustment managers. The details of the plan of readjustment need not, for this purpose, be considered. It was in fact quite similar in its general outline to the reorganization plans which are discussed in the chapter following. The point that interests us here is the fact that in spite of the obvious merits of the plan, its remarkably strong backing and the general indorsement of the financial press and of financial authorities, the final results were disappointing. It proved to be impossible to secure the voluntary assent of all, or practically all, the security holders, and it was found necessary to go through the cumbersome and expensive process of reorganization.
A similar attempt was made a few years ago in the case of the Hudson and Manhattan Company which operates the underground railway system through the Hudson River tunnel. In this instance the number of holders of obligations was much smaller and the plan of readjustment was successfully carried through. This plan is a very common procedure with smaller companies and, wherever practicable, is usually by far the most economical and most satisfactory method of meeting a condition of insolvency. Its success, however, is always dependent upon the presence of a fair degree of mutual confidence and good faith among the various parties concerned.