BURE AU OF RA, L WAV I' '
^ Wfc' C.'íC- ''I (.
$30,000,000
Paris-Lyons-Mediterranean R^dlroad Company
6% External Sinking Fund Gold Bonds
Due August 15, 1958
(Part of an authorized issue of $40,000,000)
Coupon bearer bonds in denominations of $1,000 and $500.
Not subject to redemption before February 15, 1932, except for the Sinking Fund as stated below.
The entire issue outstanding, but not any part, will be redeemable at 103% and
accrued interest, at the option of the Company on February IS, 1932,
or on any interest date thereafter.
The Bonds are to have the benefit of a Cumulative Sinking Fund calculated to redeem
the entire issue by August 15, 1958. This Sinking Fund will begin August 15, 1929, and is
to operate by purchases of the bonds at or below 100% and interest or by the redemption on
August 15, 1929, and any August 15 thereafter, at 100% and interest of bonds to be drawn by lot.
For further information regarding this issue of bonds reference is made to the accompany¬
ing letter from the Paris-Lyons-Mediterranean Railroad Company.
The undersigned will receive subscriptions for the above bonds, subject to
allotment, at 83% and accrued interest to date of delivery.
At the offering price the Bonds yield about 7.35% to maturity. In case of earlier redemp¬
tion of the entire issue at 103%, the yield increases gradually to a maximum of 8.78% if called on
February 15, 1932, the earliest date on which the entire issue may be redeemed, and in case of
any bonds redeemed at 100% by the sinking fund, to a maximum of 9.22% as to any bonds re¬
deemed on August 15, 1929.
The undersigned reserve the right to close the subscription at any time without notice,
to reject any application, to allot a smaller amount than applied for and to make allotments in
their uncontrolled discretion.
Payment for bonds allotted is to be made in New York funds, against delivery of tempo¬
rary certificates, deliverable if, when and as issued and received by the undersigned and subject
to the completion of our purchase and to approval of our counsel. The temporary certificates
will be issued by The National City Bank of New York who will act as Bond Registrar.
KUHN, LOEB & CO. THE NATIONAL CITY COMPANY
New York, March 17, 1922.
Paris, March 16, 1922.
Messrs. Kuhn, Loeb & Co., and The National City Company,
New York, N. Y.
Dear Sirs:
Referring to the issue of $30,000,000 6% External Sinking Fund Gold Bonds
of this Company, due August 15, 1958, which form part of an authorized total loan
of $40,000,000, I beg to give you the following information :
The Compagnie des Chemins de Fer de Paris à Lyon et à la Méditerranée
(Paris-Lyons-Mediterranean Railroad Company) was organized in 1857. It is by
far the largest railroad enterprise in France, owning nearly 25% of the French
broad gauge lines. The Company's concession expires December 31, 1958. Its
system in France, comprising about 6,121 miles of road, consists of a main trunk
line from Paris to Lyons, the chief industrial center of Southern France, and from
Lyons to Marseilles, the most important French port on the Mediterranean, with
branches and extensions throughout the part of France southeast of Paris, through
the French Riviera and to the Swiss and Italian frontiers. In addition, the Company
operates 641 miles in Algeria, of which 412 miles are under lease. The Company
has outstanding debenture bonds to the amount of Fes. 8,065,800,500 and £5,000,-
000. None of these bonds carries any special security, nor is any part of the system
or its rolling stock mortgaged in any way. The capital stock of the Company,
originally amounting to Fes. 400,000,000 has, through amortization to date, been
reduced to Fes. 345,161,000. Under the Convention of 1883, between the Govern¬
ment of the French Republic and the Company, the Government guaranteed a divi¬
dend of 11% to the holders of the capital stock of the Company. Before the war the
Company was so successfully operated, however, that dividends in excess of the
guaranty were paid out of earnings.
At the outbreak of the war, the government took control of all the French
railroads in order to insure efficient coordination for military purposes.
A new Convention was entered into on June 28, 1921, between the French
Government and the larger railroad systems, including this Company, approved
by the "Law Regulating the Great Railroad Systems," dated October 29, 1921, re¬
vising the status of the railroads. Under this Convention and Law there is estab¬
lished a "common fund" for the purpose of creating financial solidarity of the
large Companies and to provide for the balancing of the receipts and expenditures
and, in case of need during any fiscal year, to provide the Companies with funds
for their current treasury needs. The railroad companies shall turn over to the
"common fund" any balance of their gross receipts available after providing for
their operating expenses, interest and amortization of their loans, a variable "prime
de gestion" (operating premium) intended to encourage efficient and economic
operation, the guaranteed dividends to the stockholders and other charges as estab¬
lished by the Convention. If, at any time, the gross receipts of a railroad should
be insufficient to meet the charges mentioned above, there will be paid to the rail¬
road out of the "common fund" any sums necessary to make up the deficiency.
The Government of the French Republic has undertaken to provide the "com¬
mon fund" with any sums by which the receipts of the common fund may fall
short of its requirements; provided, however, that if the Minister of Public Works
so requires, the railroads will issue bonds for such purposes, the Government of the
French Republic guaranteeing the interest, amortization and actual expenses of the
service of such bonds until paid. The Convention further provides for an adjust¬
ment of tariffs, if necessary, in order to provide the railroads with sufficient revenue
to meet expenditures. In regard to Fes. 1,673,000,000 of bonds issued by the Com¬
pany under special Law of December 26, 1914, to cover its deficiencies of Fes. 1,229,-
000,000 since the beginning of the war, the Convention provides that the Govern¬
ment will reimburse the Company therefor by the payment to the Company of
annuities to cover the service for interest and amortization of these bonds.
The Paris-Lyons-Mediterranean Railroad Company covenants, and the bonds
will so state, that it will not, while any of the bonds of this loan are outstanding, be
instrumental in, or give its consent to, any change in the Convention with the Gov¬
ernment of the French Republic, approved by the Law dated October 29,1921, which
would curtail any security, guaranty, benefit or advantage accruing to the Company
in respect of the bonds of this loan, or through the Company to the holders of the
bonds of this loan under said Convention or said Law of October 29, 1921.
The Railroad Company also covenants, and the bonds will so state, that, so long
as any of the bonds of this issue shall be outstanding, it will not create any mort¬
gage, lien or other charge on any of its properties or revenues, or on any of the
rights, benefits or advantages accruing to it under the Convention dated June 28,
1921, with the Government of the French Republic, and the Law of October 29,1921,
approving the said Convention, unless such mortgage, lien or charge shall expressly
provide that the bonds of this issue outstanding shall, ratably with any other indebt¬
edness which such mortgage, lien or charge may be given to secure, be entitled to
the security afforded by and be secured by such mortgage, lien or charge.
In case of repurchase of the concession of the Paris-Lyons-Mediterranean
Railroad Company by the Government of the French Republic before the termina¬
tion of said concession, said Government has undertaken to indemnify the Com¬
pany by the payment of annuities, which will be sufficient to provide for the
service of interest and amortization in respect to the bonds of this loan then out¬
standing.
The Railroad Company has obtained assurance from the Government of the
French Republic that, while any of the bonds of this issue are outstanding, no
obstacle will be placed in the way of the Railroad Company regarding the pur¬
chase and remittance of the necessary funds to enable the Railroad Company to
fulfill its obligations in respect thereof.
The 6% External Sinking Fund Gold Bonds have been duly authorized by the
Budget Law of the French Republic dated December 31, 1921, in accordance with
Article 2 of the "Law Regulating the Great Railroad Systems," dated October 29,
1921, pursuant to the provisions of Title II of the Convention of June 28, 1921,
entered into between the Government of the French Republic and the great French
railroad systems, approved by said law. The proceeds of this issue will be utilized
for purchases of rolling stock, for the electrification of certain lines and for other
improvements.
The present loan and £5,000,000 6% Sterling Bonds, of the same t3i^e as the
present Dollar issue, quite recently issued in London with marked success at 86%,
and now selling at 90f^%> form the only outstanding external long term debt of
the Company.
The bonds of this loan will be issued in coupon bearer form, in denominations
of $1,000 and $500, will be dated February 15,1922, will mature on August 15,1958,
and will bear interest from February 15, 1922, payable semi-annually on February
15 and August 15 in each year. Principal and interest and premium in case of
anticipated redemption will be payable in gold coin of the United States of America
of or equal to the standard of weight and fineness existing March 1, 1922, at the
office of Kuhn, Loeb & Co., or at the office of The National City Bank of New York,
in the City of New York, without deduction for any French governmental taxes or
any other French taxes, present or future.
Beginning August 15, 1929, the loan will be redeemed through a cumulative
Sinking Fund by repurchases if bonds are obtainable at or below par, or by annual
drawings at par if not so obtainable, in amounts sufficient to retire the whole issue
by August 15, 1958.
In case of drawings, the numbers of the bonds to be redeemed shall be deter¬
mined by lot and notice of redemption, specifying the numbers of the bonds desig¬
nated for redemption, shall be published twice a week for at least three weeks pre¬
ceding the redemption date, in two newspapers of general circulation in the City
of New York by Kuhn, Loeb & Co., the fiscal agents for the loan.
On February 15, 1932, or on any interest payment date thereafter, the Com¬
pany "may at its option redeem all the bonds of this loan then outstanding, but not
a part thereof, at 103% of the principal amount thereof and accrued interest, pro¬
vided notice of such redemption be published twice a month for at least three
months preceding the redemption date, in two newspapers of general circulation in
the City of New York.
Application will be made to list the 6% External Sinking Fund Gold Bonds
on the New York Stock Exchange.
Yours very truly,
(Signed) STÉPHANE DERVILLÉ,
President, Board of Directors.
The above letter, having been received by cable, is subject to correction.
3 5556 042 158436
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