40 LOGGING 



The chief security rests upon the stumpage. Conservative 

 bond issues do not aggregate more than 40 or 50 per cent of the 

 present value of the stumpage, based on an appraisal by com- 

 petent timber estimators. In view of the constant increase in 

 timber values and the awakening interest in fire protection this 

 limit is ample for the protection of the bond holder. 



Sawmill plants, railroads and logging equipment are often 

 made a part of the security offered, but they should constitute 

 only a small portion of the total, for while they are indispensable 

 to the conversion of stumpage into a salable product, their value 

 is chiefly dependent on the supply of stumpage back of them. 

 Sawmill plants rapidly depreciate in value, are a bad lire risk, 

 and on the exhaustion of the stumpage the owners can seldom 

 realize more than 20 or 30 per cent of the cost. They should 

 not be relied upon to any great extent as security even though 

 heavily insured. Logging railroads are usually temporary in 

 character, and the rights-of-way are often abandoned as soon 

 as logging in a given section is completed; therefore, unless the 

 road is to be continued under charter, the chief value is in the 

 worth of the rails and equipment. 



Timberland has not as yet been accepted as security in a bond 

 issue, but when valuable for agricultural or other purposes it 

 adds strength to the financial resources of the mortgagor. 



Where the title to the land is in doubt, the timber standing 

 on it should not be accepted as security. Timber rights that do 

 not expire previous to the maturity of the bond issue are accepted 

 as security at one-fourth their value by some underwriters. 



Some of the more recent issues have been guaranteed by 

 wealthy lumbermen, which forms a further basis of security 

 although many desirable bonds are not so guaranteed. 



Timber bonds as a rule yield 6 per cent with a premium vary- 

 ing from loi^ to no when the bonds are retired before maturity. 



The issues mature in from ten to thirty years, the first of the 

 series coming due in from six months to two years after issuance, 

 the remainder at semiannual or annual intervals. The retire- 

 ment of all bonds is made optional and most mortgagors take 

 advantage of this fact to pay off the issue as rapidly as possible. 



