42 LOGGING 



creases and protection becomes more certain, the tendency will 

 be to regard timber bond issues with greater favor and bond 

 buyers will be satisfied with a lower rate of interest. Therefore, 

 it will be more advantageous to the stumpage owners to pay off 

 their indebtedness as soon as they can do so, and if necessary se- 

 cure a later loan at a more favorable rate. Unless a company is 

 well fortified financially, a heavy payment may impose a hard- 

 ship on operators during periods of depression, and if the margin 

 of profit is not sufiicient to meet a high sinking fund rate the 

 company may be forced to default on the bonds. 



Floating' a Bond Issue. — Timber bonds are now sold by a few 

 brokerage firms in the East, and also some of the larger cities of 

 the Pacific Coast but their chief market is in Chicago. They are 

 handled by some brokers in connection with other bonds, but 

 many of the best issues have been placed on the market by 

 brokers who make a specialty of timber bonds. Although the 

 majority have been sound there have been some unsafe issues 

 floated, largely because the investigation prior to the acceptance 

 of the bonds was superficial, and the brokers did not understand 

 the nature of the securities they wished to sell. 



A timberman who desires to float a bond issue on his property 

 appHes either to a bond house or banker to negotiate the loan. 



One of the foremost timber bond brokerage houses in the 

 country, which claims to have sold about sixty million dollars' 

 worth of timber bonds without a default of principal or interest, 

 gives the following as their mode of procedure previous to 

 negotiating a loan. 



"When a lumber company desires to make a bond issue on 

 its timberlands and sawmill plant as security, we require of it 

 a general statement showing the valuation of the property, the 

 number of acres of timberland, varieties of timber, the estimated 

 amount of lumber it will produce, and other information of a 

 general nature, including the amount and purpose of the bond 

 issue desired. 



''If the security seems ample to make such bond issue safe 

 and investigation into the credit and standing of the company 

 is satisfactory, we agree to accept the bond issue if our own 



