The Secretary of State to the Chargé in Haiti (Dunn)
86. For General Russell.
Mr. Farnham informs the Department that the Association Nationale acting for the French bondholders have indicated that they are willing to accept the proposed plan for reorganization of National Railroad on condition that they receive $35.75 cash and $73.39 [$72.39] in new Government bonds for each $96.53 (500 francs) of railroad bonds with all coupons attached. He is convinced, after prolonged negotiation, that these are the best terms which can be secured. In order to reach final agreement with French bondholders he must be authorized to make a definite offer on these terms.
To make possible a final agreement and to carry out the provisions of the plan drawn up last February and informally approved by [Page 421] President Borno, it appears necessary that the Council of State should pass a law containing the following provisions:
- Authorizing the issue of $4,400,000 in C bonds, of which $2,660,000 are to be issued at once to be exchanged at the rate of $72.39 in C bonds for each 500 franc bond. The remainder to be issued for further construction as and when required as provided in the plan of reorganization. The issue of C bonds to be contingent upon the acceptance by the bondholders of the plan of reorganization.
- Sanctioning the plan of reorganization, changing Articles I
and III as follows:
- Article I: The present bondholders will contribute $600,000 of the money held by the Receiver for the payment of the interest. This sum shall be entirely devoted to new construction.
- Article III: The present bondholders shall exchange their railroad bonds for bonds of the Republic of Haiti to be issued as a] part of the loan already authorized on the basis of $72.39 of Government bonds for $96.53 of railroad bonds. The railroad bonds received in exchange shall be either retired or cancelled as requested by the Receiver.
- Authorizing the Government to enter into an agreement with the Railroad Company, embodying the plan of reorganization and providing for the exchange of bonds and the use of the funds contributed by the bondholders for new construction. The agreement would also provide for the subsequent negotiation of a new concession embodying the provisions of the plan of reorganization. The new contract will terminate all obligations of the Government with respect to its guarantee of the bonds of the Railroad and provide that the Railroad should not issue additional bonds in connection with new construction.
It is very important that the law sanctioning the plan should be enacted immediately and the agreement with the Railroad Company signed as soon as possible thereafter in order that Mr. Farnham may again proceed to Paris to make final arrangements with the bondholders. He desires to have a conference with the bondholders in Paris about August 25th. Judge Mayer41 also has arranged to be in Paris at that time and his presence would materially facilitate the negotiations. It is suggested, therefore, that authorization be given as soon as possible to the Haitian Minister in Washington to sign the agreement with the Railroad Company.
It is contemplated that the payment of cash to the bondholders and the exchange of bonds should be handled by some bank in Paris acting as agent of the Haitian Government and responsible [Page 422] directly to that Government. The funds available for new construction will, in accordance with the plan, be placed in trust and withdrawn only with approval of the Financial Adviser on certificates of the Engineer-in-Chief as the construction progresses.
The funds now available for sinking fund on the railroad bonds will be used for the payment of the debts and expenses of the Receivership and any balance will be added to funds available for new construction.
You will impress upon the Haitian Government the necessity for prompt action in order to take advantage of the willingness of the bondholders to reach an agreement. The Department feels that an agreement along the lines proposed will be highly advantageous to the Haitian Government.
- Julius M. Mayer, Judge of the United States Circuit Court of Appeals, Southern District of New York. The receivership of the National Railroad of Haiti was under the jurisdiction of this court.↩