Readjustment

Sometimes called simply adjustment; a readjustment is when the financial reconstruction or rehabilitaticn of a railroad or other corporation is voluntary—that is, by concurrence of the security holders. Reorganization, as distinguished from readjustment, is when the financial reconstruction is compulsory—that is, when it is effected by a receivership and foreclosure.; In a readjustment (a financial reconstruction that is voluntary) bondholders may exchange their bonds for new bonds bearing a lower rate of interest than the old ones, but in such a case the lo in interest is compensated for by the delivery to the holders of the bonds who make the exchange of a bonus in (a gift of) stock or in some other security, such as income ‘ bonds (income bonds receive interest only if earned). Or, the bondholders may exchange their bonds for a smaller amount of new bonds, receiving stock or income bonds as compensation for the surrender of a portion of their holdings. Again, cumulative stock may be exchanged for a larger amount of non-cumulative stock. Or, the exchange may be on even terms, with compensation for the: surrender of the cumulative right on the stock. The compensation usually takes the form of a bonus of some kind, as, for instance, income bonds. 437