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Mr. Mullins. The prospects are that the bondholders will foreclose.

Mr. KOPPLEMANN. Have you any reason to believe that they will foreclose?

Mr. MULLINS. Yes.

Mr. HANCOCK. Did I understand you to say that interest is an item with you?

Mr. MULLINS. Yes, quite an item.
Mr. HANCOCK. You are paying 6 percent interest?
Mr. MULLINS. Paying 6 percent.

Mr. Hancock. And if you borrowed from the Government you could get it at 4?

Mr. MULLINS. We hope so.
Mr. Hancock. And that 2 percent is vitally important with you?
Mr. MULLINS. It is.

Mr. Reilly. Why can't you take up the question of refinancing with the present creditors of the company?

Mr. MULLINS. They want their money. You see, the money was borrowed to get over this gap in there until such time as these bonds could be sold. There has been no market for bonds. The banks have waited and waited and waited.

Mr. Reilly. Can they make their money if they do foreclose?

Mr. Mullins. I think so. We have two plants, one in Birmingham and one at Mobile. They are worth $2,000,000. Obligations outstanding are about $300,000.

Mr. KOPPLEMANN. How many people do you have working for you?

Mr. MULLINS. In normal times we have at the two plants about 300 people, white and black.

Mr. KOPPLEMANN. If you secured this refinancing or a loan, what difference will it make in the number of people you have employed?

Mr. Mullins. It will increase employment so far as making our necessary repairs and improvements is concerned.

Mr. KOPPLEMANN. Will it increase employment so far as the work that you are engaged in is concerned?

Mr. Mullins. No. On account of the character of our business, the warehousing and compressing of cotton, it will not.

Ir. Brown. What is your charge for storing cotton?
Mr. MULLINS. Fifteen cents a bale a month.
Mr. BROWN. That almost broke these small fellows in my section.

Mr. MULLINS. It is about to break us. The 25-cent rate, if I may put this in, is now being paid by the Commodity Credit Corporation for storage, plus insurance. This rate is almost starvation to the small warehousers, yet they at seeking to keep this cotton, for some unknown reason, they have not figured out why. Their insurance costs them anywhere from 10 to 15 cents a bale a month, and it nets them only about 10. Our rate of 15 cents is based on compressed cotton in sprinkled warehouses. Our insurance rate will run about 24 cents a bale a month.

Mr. Sisson. What is the amount of money that you require for your refinancing and repairs and your working capital altogether?

Mr. MULLINS. About $300,000.

Mr. Sisson. And have you applied this year to the R. F. C. for a loan?

14516235.6

Mr. Mullins. Yes, sir; but if we could have met their requirements we would not have needed the money.

Mr. KOPPLEMANN. What do you mean by if you “could have met their requirements"? Mr. MULLINS. Well, their requirements are

very strict, Mr. Kopplemann, and there were just so many of them that I don't quite remember just what they all were. It was just out of the question. We could not do it and it was dropped.

Mr. KOPPLEMANN. You could not meet them?
Mr. Mullins. Could not meet the requirements.

Mr. Sisson. Let me ask a question: If we are going to have a specific case here let's see what it is. How much of this $300,000 is required for paying off existing obligations?

Mr. Mullins. It would be about $275,000.

Mr. Sisson. You are asking for a loan of $300,000, $275,000 of which goes to creditors?

Mr. Mullins. Refinancing.

Mr. Sisson. Won't those creditors go along with the Government on any part of that?

Mr. MULLINS. I think that they would.

Mr. Sisson. Then is that $275,000 the full amount that is owed by your two concerns there?

Mr. Mullins. Approximately.
Mr. Sisson. What security do you have to give for the $300,000?
Mr. MULLINS. What security would we have?
Mr. Sisson. Yes.

Mr. Mullins. A first mortgage on all the real estate and personal property in the two plants.

Mr. Sisson. What are your plants worth?

Mr. Mullins. About $2,000,000. We want the loan for a period of 5 to 10 years, or a period of 5 years with the privilege of refinancing at the end of that time.

Mr. FORD. If your plant was running normal what would it produce what would the income be?

Mr. MULLINS. About $50,000 a year.
Mr. FORD. You employ how many men?
Mr. MULLINS. About 300.
Mr. Brown. Have you lost any money in the last few years?
Mr. MULLINS. Yes, sir.
Mr. Brown. Warehouses in my section have all made money.

Mr. Mullins. Well, that is just the case. We have lost money because of the cotton being impounded by the loans at the primary points. We have suffered. Our business-well, take the Mobile plant, for instance: Three years ago we handled 100,000 bales of cotton. Last year we handled 25,000, and this year it will run about the same thing. There is no cotton raised in the immediate vicinity of Mobile. There is none raised in the immediate vicinity of Birmingham. Birmingham is a mineral district, as you know, and Mobile County is largely given over to truck farming.

The CHAIRMAN. Mobile is also a shipping port.

Mr. MULLINS. Yes, sir; that is a port and a shipping point. That is another sore spot too, sir. Exports have fallen off, as you probably have heard.

Mr. CAVICCHIA. That is the main reason for the falling off in your business?

Mr. MULLINS. No, sir. The main reason is the storing of this cotton at the primary point in the small warehouses; and these small warehouses, by the way, are barns, old stores, and gin sheds and what-have-you.

Mr. Cavicchia. If cotton was being exported as it was 4 or 5 years ago

Mr. MULLINS. There is none being sold. There is no trade in cotton. It is at a standstill.

Mr. Cavicchia. If cotton were being exported today in the same quantity that it was 4 or 5 or 6 years ago, your Mobile warehouse would have business?

Mr. Mullins. Oh, yes, sir; undoubtedly

Mr. CAVICCHIA. Those are the two factors: The fact that we are not exporting cotton, and the fact that it is being stored back in the primary points?

Mr. MULLINS. Yes, sir; that is correct, and I think it applies to both plants.

Mr. MEEKS. Your business has been principally the storage of cotton?

Mr. MULLINS. Yes, sir.
The CHAIRMAN. How much cotton does Birmingham handle?
Mr. MULLINS. We have handled as high as 120,000 bales a year.

The CHAIRMAN. You mean they sell that on the market in Birmingham?

Mr. MULLINS. Oh, no. It is concentrated in there from all over north Alabama.

The CHAIRMAN. Why is it concentrated? Mr. MULLINS. On account of the rail and reshipping privileges allowed in Birmingham, which makes it a strategic point from the cotton merchant's standpoint.

The CHAIRMAN. It is also the financial side, too?
Mr. MULLINS. Oh, yes.

The CHAIRMAN. And then they have a pretty large milling interest there?

Mr. Mullins. They have a fairly large milling interest in Birmingham, the Sylacauga district, for instance.

The CHAIRMAN. Any further questions? All right, Mr. Mullins; we thank you.

Mr. KOPPLEMANN. We have another witness who wants to get away.

The CHAIRMAN. Mr. Kopplemann, the House is meeting under unusual circumstances today, and I don't think we should be absent too long

Mr. KOPPLEMANN. I don't think this man will take over 5 minutes. It is Theo. W. Osbahr of the Northern New Jersey Oil Co.

The CHAIRMAN. Very well; we will hear Mr. Osbahr.

STATEMENT OF THEO. W. OSBAHR, SECRETARY NORTHERN NEW

JERSEY OIL CO., NEWARK, N. J. Mr. OsBAHR. Briefly, gentlemen, the history of our financial difficulty dates back to the beginning of or just prior to the depression. Due to condemnation of part of our property by the State Highway Commission, it became necessary to relocate our bulk storage plant at a very much greater expenditure of money than would have been necessary had not this property been condemned.

Mr. CAVICCHIA. Where are you located?
Mr. OsBahr. Riverside in Newark on the Passaic River.

Mr. Cavicchia. They gave you a pretty good price when they condemned.

Mr. OsBahr. Thirty-five thousand, when the people next door got a hundred and fifty.

Mr. Cavicchia. You did not have the right appraiser.

Mr. OSBAHR. No, Mr. Cavicchia, we did not. The company had to erect a certain type of building because of the loss of a section of the property, which necessitated piling and so forth under tanks and buildings, and it resulted in an investment of approximately $150,000 more than would have been necessary. Fortunately we were able to float a mortgage with one of the Jersey banks, but that mortgage or a balance on it becomes due on the 1st of January. In the meantime, due to the situation in the petroleum industry, with which probably you gentlemen are more or less familiar, continuous price wars and so forth, the company has not been able to operate at an over-all profit after depreciation. Before depreciation the company has shown a profit.

Up until the beginning of the depression we had a line at two banks totaling $75,000. At the time of the depression we had no outstanding obligations to the banks, and since then of course have been able to obtain no extension of line.

Mr. Cross. Just a question: What is the name of your company? Mr. OSBAHR. Northern New Jersey Oil Co.

Mr. Cross. You are not an affiliate or not one of the branches of the Gulf or Texas Oil?

Mr. OsBahr. No; it is an independent company operating a chain of eight service stations and largely distributing fuel oil for industrial and domestic purposes.

Mr. KOPPLEMANN. With reference to Congressman Cross's question, if you were an affiliate of any of the big oil companies, you would not

Mr. OSBAHR. We would not be here.
Mr. KOPFLEMANN. You would not be asking for aid?

Mr. OSBAHR. Would not be here. That is the difficulty at the present time. We are immediately concerned with the fact that of the original $160,000 mortgage we will owe $80,000 on January 1. It has been amortized at the rate of $1,000 a month and interest. That will be handled by the bank with difficulty. In addition to that, we have been doing business with the Standard Oil Co. for 5 years under most unfavorable purchasing circumstances. If we were able to finance through some means our obligation which has built up over 5 years as a result of competitive conditions in the industry, we would be in a position to go out and buy at prices which would enable the company to make a sufficient profit to retire its entire obligation in a period of about 5 years.

I have had one sample of the proof of that. We handle one grade of oil which runs into a tremendous quantity, approximately 25 million gallons, which could be bought, if we were able to buy elsewhere than our present source of supply, at an eighth of a cent a gallon less, which in round figures is approximately $30,000 a year on just one

item. But being more or less mortgaged to the Standard Oil Co. on an obligation which has accrued over the past 5 years, we are in no position to go out and take advantage of our ability to buy, on the quantity that we handle, at an advantageous price.

Mr. Cross. Don't they block any loan you attempt to make, the Standard Oil Co.?

Mr. OsBAHR. In July 1934, we took up with the Reconstruction Finance Corporation and also the Federal Reserve bank the question of a loan. In the meantime, with the company operating at practically no profit for a period of 5 years and confining itself necessarily to automotive equipment and material for improvements, and so forth, its current financial position has gotten to about 1 current asset to 128 current liabilities, and the result is that in spite of the fact that the company has over $600,000 investment in service stations, real estate buildings, automotive equipment, tanks, and so forth, with an equity of approximately $400,000 of that, we are in no position to get from any banks a participation in any reconstruction or Federal Reserve loan.

And furthermore, while formal application was not made either to the R. F. C. or the Federal Reserve Bank, we were informed by the gentleman to whom we made the approach and submitted the preliminary figures that the condition of the company, that is, its current condition, would not warrant any loan on the part of the Government, because it was not alone, as these previous speakers stated, a workingcapital loan; it was a loan to take care of previously accumulated obligations.

Also we went to two of our banks, one of which we have done business with for 13 years.

The moral risk of the company is probably one of the most giltedged in the section. The company was originated by a resident of Montclair, who was a wealthy man before the depression, and the vice president of the company is also vice president of a large publishing company in New York. These two applications to our banks, one in Orange and one in Newark, were point-blank refused.

(Discussion off the record.)

Mr. OSBAHR. We feel that to attempt that form of refinancing would be very much more expensive. The banks in that district, as you know, Mr. Cavicchia, are bulging with money.

Mr. Cavicchia. You have done business with the Savings and Investment?

Mr. OsBAHR. We have done business with them for 50 years, the company in Montclair. You have probably heard of them.

Mr. ČAVICCHIA. How much do you owe the banks?

Mr. OsBAHR. We do not owe the banks a nickel-thank God for which.

(Discussion off the record.)

Mr. Cavicchia. The main reason why the R. F. C. turned you down was because you had not made a profit in the last 4 or 5 years.

(Further remarks off the record.)

Mr. Cavicchia. I am glad to have this on the record, Mr. Chairman, because the R. F. C., as I understand it from the people who come to me, refuse to make loans to those concerns who have not made a profit in these years, no matter how good the security might be, and I wanted to emphasize that point.

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