Business: Odium in Action

Odlum in Action

Boarding the Normandie at Southampton one day last week, President Floyd Bostwick Odium of Atlas Corp. dispatched to his office in Manhattan a radiogram as crisp as his sandy hair. Read the message: “Closed deal 30 minutes before departure.”

Ten years ago when Mr. Odium was scuttling about with a fistful of blank checks buying foreign power properties for Electric Bond & Share, such a message might have needed amplification to determine just what deal he had closed. Last week there was no room for doubt. The No. 1 U. S. investment truster had gone to London for the specific purpose of giving British capital an opportunity to repatriate a great British power company.

For some $25,000,000 Mr. Odium sold back to British subjects their Greater London & Counties Trust, Ltd., an aggregation of prosperous utility properties controlled by Promoter Harley Lyman Clarke’s Utilities Power & Light Corp. Promoter Clarke had picked them up in the 1920’s while he was pyramiding his $400,000,000 holding company. In the field of financial pyramiding Promoter Clarke was an architect with considerable imagination. He it was who piled his General Theatres Equipment, Inc. on top of Fox Film early in Depression, a heroic achievement which cost Chase National Bank many a million, sent two members of the New York Stock Exchange to the wall, led to the complete collapse of the original theatre equipment company.

In Utilities Power & Light Harley Clarke built along classic lines. The operating companies, serving 488 communities in Britain and 587 in the U. S. and Canada stemmed down from Utilities Power & Light Corp., a traditional holding company. Working control of this holding company, however, was held by a super-holding company called Public Utilities Securities Corp. (“Pusco”). On top of Pusco was a private super-super holding company, and on top of that was Harley Lyman Clarke.

A few years ago Promoter Clarke pledged his precious Pusco shares for a measly $2,000,000 loan from the old Dawes bank in Chicago. He never saw them again. In the process of liquidating the notorious $90,000,000 Dawes loan, they ended up in Jesse Jones’s RFC.

Meantime Promoter Clarke was trying desperately to keep Utilities Power & Light from teetering over the brink of disaster. At one time its debentures sold as low as 22¢ on the dollar. Nevertheless, Promoter Clarke, who is still Utilities Power & Light’s president, managed to scrape together enough cash on every interest date, thus avoid receivership or reorganization.

To Investment Truster Odium, a rare judge of good bargains, those Utilities Power & Light debentures looked cheap. So he began to buy them for his Atlas Corp. Since he did not fancy the Government as owner of a company; of which he was a creditor, he went to Chairman Jones with a proposition: Atlas would, in effect, swap some of its Utilities Power & Light debentures for the Pusco stock held by RFC. A deal was struck, giving Atlas control of Utilities Power & Light, Mr. Jones marketable securities.

Ultimately Atlas acquired not only Pusco but a face value total of $20,000,000 worth of Utilities Power & Light debentures—40% of the holding company’s funded debt. In making these huge purchases the market price of the debentures nearly doubled. But the fact remained that the holding company could not continue to pay interest out of capital indefinitely. To avoid a 77B reorganization something had to be done.

Fortuitously, utility shares were as high in Britain as they were low in the U. S., having boomed on British recovery and the findings of a special commission that public ownership was not in the best British interests. By selling its holdings in Greater London & Counties Trust the U. S. parent company would realize cash to buy up and retire some of the debentures which were plaguing it. While Greater London & Counties Trust supplied about one-half the holding company’s total income, the proceeds of the sale would enable Utilities Power & Light to buy at open market prices considerably more than one-half its bonds and still leave something for needed working capital.

Armed with a power of attorney from Utilities Power & Light’s directorate, Mr. Odium crossed the Atlantic to find a buyer. This he did last week. The buyer was the London branch of the international banking house of Lazard Freres, acting for a British group. The benefits of Mr. Odium’s Atlas Corp. will flow from its Utilities Power & Light bonds, which jumped about five points last week, the 5% issue rising to 75¢ on the dollar, the 5½% issue to 78¢. When & if the Utilities Power & Light directors vote part of the proceeds of the British sale for bond retirement, Atlas Corp. will be on the same footing as any other debenture holder. If Atlas is willing to sell its debentures to the company at a lower price than other holders, Atlas will get its money out, but the position of the other bondholders will be strengthened, because there will be fewer bonds outstanding. On the other hand, if Atlas holds out, other investors will get the cash, Atlas the improved position.