AR, S(ofM) 9/11/1865 P

Circular to the Bondholders and Creditors of the Southern Railroad Company, of the State of Mississippi
This September 11, 1865 circular reports on the condition and financial status of the Southern Railroad Company after the Civil War
Continental Hotel, Philadelphia, Sept. 11, 1865

   The Southern Railroad Company has suffered seriously in its interests, by the four years of bloody civil war that has just closed, and as the President of the Company, I have been instructed by the Board of Managers to see our creditors, and lay before them a full and frank exhibit of the condition of the road, and the financial affairs of the Company.

   We met our obligations with satisfactory punctuality up to the first of January, 1861, and until the ever memorable civil war became inevitable our prospects were growing brighter and brighter.

   The Southern Railroad is 140 miles long, starting from Vicksburg, on the Mississippi river, and running to Meridian on an east and west line, there it connects with the Selma and Meridian Railroad, with the Mobile and Ohio Railroad, and also with the North-east and South-west Alabama Railroad, which, when completed, will connect Meridian with Chattanooga by the shortest practicable line. The Southern Railroad intersects the New Orleans, Jackson and Great Northern Railroad at Jackson, Mississippi, the capital of the State, distant 45 miles from Vicksburg. Its important western connection is through the Vicksburg, Shreveport and Texas Railroad, which starts from the west bank of the Mississippi river, opposite to Vicksburg, running on an east and west line to Shreveport, on the Red River, and thence to Marshall, in Texas, but for the war this latter road would now have been completed, and in full operation, affording to all parts of Texas a railway communication in connection with the Southern Railroad, with every part of the United States, thereby constituting the Southern Railroad, by its location and important eastern and western connections, a first class railroad in every sense of the term, and it is a reasonable conclusion, that no road of its length in the South, is capable of being made more lucrative than it will be, when its eastern connections with Montgomery and Chattanooga, and its western connection with Texas, are completed.

   A glance at the map will show, that between Memphis and the Gulf there is no other railroad running East from the Mississippi River, and it is hardly possible that a competing line will ever be built, and, therefore the Southern Railroad must ever be one of the main links in the great National Chain of Railway, passing through the Southern States and Texas, on the 32d parallel of Latitude, to California.
   The entire construction of the Southern Railroad, for 140 miles, was not completed until June 1861, and for nine months previous to that date, the trains ran no farther east than Newton Station, 109 miles from Vicksburg, notwithstanding the hindrances to business and the difficulties incident to the active work of construction then going on, and for three-fourths of the year the trains not approaching within 30 miles of the eastern terminus, yet the earnings for the year ending August 31, 1861, were $301,611 77.

   At the close of the war, the Company had increased its liabilities between the first of September, 1861, and the first of July, 1865, from $2,443,357 to $2,922,197 70, a difference of $478,840 70, which is made up altogether of arrears of interest. Under these adverse circumstances, I appeal to your sense of justice and magnanimity, for a liberal extension of the heavy debt, with which we have been burdened by the war, and now find ourselves utterly unable to pay, and to ask from you the adoption of some reasonable arrangement which, while it will secure to the creditors a full payment of all their claims, will enable the Stockholders to save something from the wreck of their property, for the families of those who invested their means and devoted their time and energies in the construction of the road, and who are now dependent on its welfare for a future support. It may not be proper in this connection to state, that nine out of ten of the Board of Managers of the Southern Railroad Company, sustained by the counsel and advice of its late and lamented President, William C. Smedes, opposed zealously the unwise and reckless policy of the Disunion party, and the secession of the State of Mississippi.

   After the struggle began, we, in common with the whole people of the South, reluctantly acquiesced in the action of the States in rebellion, and rendered obedience to the laws established by the Confederate Government.

   During the pendency of the war, notwithstanding the large amount of the annual earnings of the road, they could not be made available for the payment of either the coupons of interest, or the bonds themselves, which matured within that period. If the currency received by the Company for the transportation of passengers and freight could have been used for that purpose, then our liabilities, instead of having increased $478,840 70, would have been diminished at least one million of dollars.

   But it is well known that there has been no currency or circulating medium of any kind, except the issues and bonds of the Confederate States, or of the individual States engaged in rebellion, in circulation in the so-called Confederate States, and those issues the Company was compelled to receive in payment for the transportation of freight and passengers, and we held nearly a million of dollars of claims against the confederate Government for railroad services at the close of the war.

   This currency depreciated so rapidly, that our creditors preferred to retain their claims against the Company to taking it in payment, and consequently only $269,207 47 as before stated, was paid by the Company on account of its indebtedness, between the first of September, 1861 and the first of March, 1865. The only investment made by the Company was the purchase of cotton in 1863, in Mississippi and Louisiana, to the amount of $175,820 34. The money was invested by Willis Holmes, an experienced dealer in cotton, and a man of irreproachable character. He purchased 2,074 bales in Mississippi and 540 bales in Louisiana, making together 2,614 bales. In 1864, when Gen. Sherman was advancing on Meridian, 100 bales of Company cotton were stored in the depot at that place, 85 of which were sent to Selma for safety, 15 not being in a condition to be moved; and in April last, when the United States forces were approaching Selma, the cotton sent there was burned, and the 15 bales that were left at Meridian were consumed by the burning of the Meridian depot. Notwithstanding the desire and efforts of the Company to preseve the cotton purchased for the payment of its debts, I fear that upwards of one-half the amount purchased will have been either burned, stolen, or otherwise destroyed before disposed of. The cotton was purchased by the Company under an order of the Board of Managers made in June, 1863, and assigned and transferred to Robert McDowell in trust, for certain creditors residing in Europe. Mr. McDowell was at the time in the South, a British subject, agent of, and authorized to act for the parties in Europe.

   These creditors were selected because the Company thought that, that was the only way to save the cotton from being destroyed by one or the other of the contending armies. The Company knew if they transferred it to Northern creditors, it would certainly be seized or burned by the Confederate authorities, and if they transferred it to their Southern creditors, then they apprehended a like fate from the United States Army. They therefore placed the cotton in the name of foreign creditors, and were thus enabled to obtain a protection for it, from both sides. This statement will explain in part the cause of the Company not having made larger investments in cotton. It was an anxious and thoughtful subject of consideration with the Board of Managers, how to invest to the best advantage the funds of the Company for the benefit of the creditors. The investment in cotton was deemed extremely hazardous as past events, and those now transpiring, fully confirm. The Confederate authorities set fire to every bale of cotton that could be found on the approach of the United States troops, and as the United States troops advanced into the country they in turn burned much of the cotton that had not been previously destroyed. However, another and the most serious obstacle to making investments, was the want of current funds to do it with, although the Confederate Government was constantly and largely in debt to the Company, yet it was found impossible to make collections of its certified accounts, and it is a fact, that for the last two years of the war, the Treasurer of the Company rarely had more than enough funds at his command to pay the current expenses of the road; therefore, however desirable it might have been for the Company to make such an investment, it really did not have the ability to do so.

   When the war ended, the Company had in their possession in the issues, bonds and vouchers of the Confederate States, $930,462 41.

   The disasters to the road and the rolling stock of the Company by the rough heel of war, have been very damaging and numerous. On the 24th of April, 1863, General Grierson's raid destroyed Newton Station, burning the depot building containing the books and papers of that office, with some freight, also destroying the cars of two trains and injuring the engines; the troops tore up half mile of track, and destroyed the trestles; it took nine days to repair the road. In May, 1863, the United States troops under General Grant, while at Jackson, burned Pearl river bridge and several hundred feet of high and expensive trestle work, partially destroying several miles of track east of Pearl river, and about seven miles of track between Jackson and Big Black river, including the valuable bridge over that river, together with upwards of 3,000 feet of high trestle work connected with it; also, Baker's Creek bridge and a number of smaller ones. On the march of General Grant's army to Vicksburg, 5 Engines and 50 Cars were captured, and 22 Freight Cars were destroyed at Jackson, that were in bad order, and could not be moved away in time to save them. The cash value of the damage done to the road between Jackson and Big Black, including Pearl river and Big Black bridges, was estimated at the time at $204,000. In the following July, after the surrender of Vicksburg, the United States army again marched to Jackson in pursuit of General Joseph E. Johnston, and pursued him to Brandon and Morton, thirteen and a half and thirty-four miles east of Jackson, tearing up the track and destroying bridges and trestles in their march, to such an extent that the trains did not run further west than Brandon before the 6th of January, 1864, and for a portion of the time the trains run no further west than Morton.

   In February, 1864, General Sherman made his great march through the State on a parallel line with the Southern Rail Road, and near enough to it for the cavalry to make sudden dashes on any station he thought proper to destroy.

   His troops burned the Station Houses at Brandon, Morton, Lake, Newton and Meridian. The Machine Shop and other Company Buildings at Lake were also destroyed on that occasion. Fortunately all the Shop Machinery, the engines and such cars as were movable, were successfully moved to a place of safety in time to save them from destruction. While the army of General Sherman remained at Meridian, seven miles of our track was as effectually destroyed as labor combined with skill and energy could do it; also, 7,000 feet of Bridges and trestles, including two expensive bridges crossing the Chunkey river, together with eighty-three other trestles along the line of the road. Superadded to these heavy losses, the valuable brick depot and warehouse at Jackson were destroyed by fire in November, 1862, and a commodious depot building at Morton was also burned in February, 1863. These two depot buildings, on account of their supposed security, were made the repositories of all the valuable records and papers belonging to the Company. It was deemed prudent to send the archives of the Company out of Vicksburg during the bombardment, and they were sent to those two depots, and were consequently all destroyed. All the furniture, with the valuable library, fine paintings and costly plate, &c., of the late Wm. C. Smedes, the then President of the Company, were entirely destroyed by the burning of the Morton depot.

   The Company has the control of the line of road not in operation between Vicksburg and Meridian.


   The Company during the war had an especial and watchful eye to the preservation and protection of the Railroad Property; and it has been its policy and aim, to the extent of its ability, to improve the track as much as possible—many thousand new cross-ties have been placed on the track in the last two years—cuts have been widened and better slopes given them; a large amount of ballasting has been used to improve the worst portions of the track; new and substantial bridges have been erected; and at the present time the road between Meridian and Jackson, is in much better condition and more permanent than it was ever before.

   There is one important feature in the organization of the Southern Railroad Company, which goes very far toward securing the fullest measure of fidelity and energy in the management of its affairs, and that is the existence of self-interest in a much larger degree than is usually found in the composition of Railroad Companies. The stock of our Company which is four millions of dollars is held by so few persons, and so large an amount held by each, that everyone feels a direct interest in the business, management, and conduct of the affairs of the Company. The present Board of Managers, consisting of eleven members, holding more than one half of the whole amount. A Company thus organized constitutes the best possible security against incompetent and unfaithful management.


   The Southern Railroad is undeniably on the shortest railroad route leading from the heart of Texas, South Arkansas or North Louisiana to the Atlantic Cities. As a great National thoroughfare, on the 32d parallel of latitude, it is without a rival, and in the nature of things cannot have a competitor, and in this connection the undersigned confidentially expressed the opinion, that with the connection at Montgomery complete, and as soon as the Vicksburg, Shreveport and Texas Railroad is completed, and the railroads in Texas converging to the Texas terminus of that road, are put in operation, the 140 miles of the Southern Railroad will favorably compare in value and in earnings with that of any other railroad of equal length in the South. As soon as these connections are made, the travel will at once be very great and will go on annually increasing, in proportion to the growth and prosperity of the old cotton States and Texas. The charter of the Company is perpetual. Its tariff of charges is without limit, and can be fixed at any rate consistent with the interests and will of the Company, and cannot be changed by State Legislation. There is an ample supply of water on the line of the road for railroad uses, favorably distributed for the construction of tanks. Its supply of fuel is inexhaustible. It has been shown by experience, that the road can be efficiently operated at an expense under fifty per cent. of the gross earnings, at the same time keeping the track and rolling stock in a proper state of repair with such renewals as to preserve the property from depreciation. The question now is, what arrangement can be made with the creditors for an extension of the debt of the Company, so as to enable it to retain the control of the road and by the necessary skill and energy restore it to the high state of prosperity and value it bid fair to attain before its prospects were blighted by the destructive war of the past four years.


   We have now in our possession 19 Engines, at the beginning of the war we had only twenty, and the one we have lost, is one of the oldest Engines, which was sent by the United States authorities from Vicksburg to the State of Tennessee.

Very respectfully.
M. Emanuel
President Southern Railroad Co.