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The financial representative of the swiftly-growing Canadian Northern required, then, three outstanding qualifications—first, great and sincere faith in Canada’s immediate future; secondly, capacity to impart his confidence to important underwriters; and thirdly, a sound judgment of the temper and capabilities of the investing class whose response is the primary justification of the underwriters’ confidence. Mr. Horne-Payne, in a degree that can only be appreciated by those who have worked with him, has these qualifications—the proof of which was the British investment of over three hundred million dollars in the Canadian Northern, during his representation of it.
One illustration only of his faculty can be given. A friend saw him at his house in Brentwood, Essex, early one autumn. “I have just come in after motoring from Buxton, where I have had a short holiday,” said Horne-Payne. “We passed through Leamington. I think I can get about three hundred and fifty thousand pounds out of the town next winter.” The records show how accurate his forecast was.
The war changed all that. With London closed to him, the indomitable Sir William, who never parted with his nerve, found in New York a combination which was willing to consider seeing the Canadian Northern through, by taking care of the millions of dormant securities that must become active, by paying off the short-term notes; and by furnishing the funds necessary to raise the system to a standard worthy of its Dominion-wide theatre of operation.
While we hung on to the job of making the best of a heart-breaking, never-ending crisis, which even the delusive gains of the war could not mitigate, the New York syndicate invited Mr. E. E. Loomis, now President of the Lehigh Valley Railroad, and Mr. J. W. Platten, President of the United States Mortgage and Trust Company, of New York, to report on the value of the property. These gentlemen, in turn, appointed Messrs. Coverdale and Colpitts, two Canadians of high standing in the engineering profession in the United States, who had been conspicuously engaged in railway and industrial valuations, to examine thoroughly the physical features and contributories of nearly ten thousand miles of Canadian Northern railway.
A year was spent on this investigation. But, while it was going on, the Dominion Government, in view of the perilous condition of the old Grand Trunk, as menaced by its offspring, the G.T.P., and of the utterly hopeless position of the National Transcontinental, which the Grand Trunk had refused to take over, appointed a Royal Commission, consisting of Sir Henry Drayton, chairman of the Dominion Board of Railway Commissioners, President Smith of the New York Central lines, and Mr. William Acworth, an eminent British railway economist, to report on the whole railway situation of Canada. No criticism is due the Government for this action, in view of its commitments to both junior transcontinentals.
Early in 1917 the Coverdale-Colpitts report was printed. It absolutely justified the broad policy on which the Canadian Northern had been built; and there was good reason to expect that the New York syndicate would participate in Canadian Northern responsibilities. But on its heels came the Drayton-Acworth report, recommending nationalization, and the Smith minority report, demurring. No syndicate in the world would have committed itself to heavy financing of a great railway system, under such conditions. The New York people held off. We held on, but with only the scantest chance of coming through the war corporately alive.
In the end the Government assumed control of the Canadian Northern congeries of railways. The alternative was a receivership and reorganization, in which the guaranteed securities would have to be honoured by the Governments concerned; and the unsecured investors would have to take their meagre chance of full salvation. On the whole, perhaps, the best interests of the greatest number were best served by what was done. But if Mackenzie and Mann had been merely bent on self-service they might have come more profitably out of a formal Canadian Northern bankruptcy.
They held almost all the capital stock. Their position would have had what Grand Trunk junior shareholders have since called the nuisance value of a certain ability to hamper any attempt to make a settlement without their concurrence. But the British investors were held to have the dominant claim. The arbitrators’ award of ten million eight hundred thousand dollars to the capital stockholders, limited beforehand by agreement with the Government to a round ten millions, meant no such gain to them. They had pledged their interest, and the money had gone into construction. Certainly they had stood to gain by the success of the great venture. They also stood to lose. They lost, and raised no voice in lamentation.