Proper terminals - that is, passenger and freight stations, yard room and trackage - especially in the larger cities, has become a matter of vast importance to railway companies. In many instances the very inability on the part of a railway to secure proper terminal facilities has prevented its entrance into a city.1 Frequently railroads are unable, on account of conditions in previous mortgages outstanding upon their property, to create an additional indebtedness to pay for terminal properties; or, again, several railways wish to share the same terminal facilities. For either of the above, or possibly for other reasons, a "terminal company" may be formed, upon which distinct issues of securities are created, the proper contracts being executed with the railroad or railroads using the same, to provide for all charges for maintenance, interest, etc. It is quite customary for the railroad or railroads to guarantee a bond issue by such a "terminal company."

Bonds of the above nature, as a rule, are considered very safe investments, as is evidenced in Massachusetts by the fact that the bonds covering what is known as the South Terminal Station have been made a legal investment for savings banks in that State.

An investor contemplating the purchase of a terminal bond must consider several things:

First, the strategic position occupied by the terminal itself; that is, whether or not satisfactory terminal facilities for the company's using the same could be found elsewhere.

Second, the standing of the road or roads using the terminal and their earning capacity above interest upon their own bonded indebtedness, whether or not in good times or bad the excess of earnings will be sufficient to meet the terminal contracts.

Third, the character of the contracts drawn between the "terminal company" and the railway company or companies, whether or not such contract or contracts properly safeguard the interest payments during the full life of the bond and provide for the payment of the principal when it matures, unless the real estate value of the terminal property is so much greater than the bonded indebtedness that the payment of the principal need not be considered; and whether the guaranty is joint or joint and several.

In brief, terminal bonds upon properties difficult to duplicate and in important railroad centres or shipping points should be good investments if proper care is taken to look into the securities along the lines suggested above.

1 The cost and importance of terminals in the larger cities is well illustrated by a struggle between two of our great railroad systems in competitive railroad building in the Northwest. The Railway Age declares that one company is reported to have invested between $11,000,000 and $12,000,000 for terminals in one city, the railroad extension leading to it being but 180 miles long, upon which the expenditures for terminals would be equivalent to $64,000 per mile, or probably a greater cost than the actual construction of the mileage itself. Estimating at $50,000, the total cost per mile of the extension, securities will undoubtedly have to be issued to the amount of about $114,000 per mile. Even with the realization of the large traffic which it is anticipated that the extension will bring about, such traffic will have to be exceedingly heavy to justify the construction of such an expensive piece of road.