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"omerchant fleet and to U.S.S hip Sales Can Be Financed Transfer of Government Vessels Simplified by New Merchant Marine Act--Federal Financing is Essential BY JOHN W. HILL, FINANCIAL EDITOR, MARINE REVIEW NACTMENT by congress of EK the Jones meastire, with its di- rect command to the shipping board to dispose of the government's merchant fleet to private purchasers, incorporates, for the first time in the history of the United States, a com- - prehensive national merchant marine policy into the law of the land. The act was framed with the ends in view | of having the government retire from the shipping business and of encour- aging the development of a strong and profitable, privately owned, American merchant marine. Many of the features of the new law, including the excess profits tax ex- emption for a period of 10 years, for American owned vessels engaged in foreign trade and the provision giving preferred mortgage liens priority over repair liens, are designed to insure the promotion and maintenance of a improve the status of ship securities in the invest- ment market. As a means of facili- tating the sale of the shipping board's vessels, by far the most important provision of the new measure is that sanctioning a liberal policy of govern- mental financing of purchases. Financial authorities who have studied the situation agree- that it would be impossible to interest pri- vate capital to the extent. of immedi- ately. absorbing all, or any consider- able part of, the government's $2,500,- 000,000 to $3,000,000,000 investment. in ships. Consequently, congress has pro- vided that vessels may be sold on a 'deferred plan covering a period not to exceed 15 years in the case of American purchasers and 10 years in the case 'of-sales to a foreign flag. Experts believe that the assumption by the government of the burden of financing ship purchases instead of throwing it upon the already over- strained investment market, greatly simplifies the problem of disposing of the fleet. Assuming that the entire fleet were to be sold to American operators. the purchase could be financed for from $250,000,000 to $300,000,000 in cash on the basis of the 10 per cent down payment, as provided in Meyer's plan which is understood to be favored by the shipping board. As a matter of fact, however, a consider- able part of the government tonnage, the. including wooden and many of the numerous smaller coal burning ships under 6000 deadweight tons will not American prove attractive to pur- chasers.. These types of ships are being sold to foreign buyers. Elimi- nating troop ships, and tankers, the shipping board owns less than 750 cargo vessels of 6000. tons deadweight and over, whose economies of opera- tion make them desirable for use in foreign trade, The aggregate tonnage of the ships which are proving most popular with American operators, is about 6,450,000 Summary of Ship Sales No. Tons, boats dead- sold weight Sales value Standard terms .. 66 439,644 $78,710,133 Gash "Sas. is)... 54 124,550 5,903,600 Discount for cash 11 40,616 6,238,392 Partial payment .. 11 47,469 6,906,625 Charter purchase . 7 ~~ 25,050 2,973,000 Option to purchase 3 23,514 5,502,360 Total ......... 132 700,823 $106,234,110 tons, and even were they to be sold at so high a figure as $200 a ton, their purchase could be financed, with a 10. per cent cash payment, for less than $130,000,000, the remainder to be paid out of earnings. Viewed from this angle, therefore, it is seen that the problem of financing the purchase of the ships by American buyers, is not so imposing as it, seems on first appearance. Fifty applications for the purchase of boats are said to be pend- ing in the shipping board's files now. The active program of the shipping board, after all cancellations, and in- cluding requisitioned ships, calls for a total of 2311 vessels of 13,592,711 deadweight tons. Of this program about 400 ships of more than 3,000,000 deadweight tons remain to be deliv- ered. Since May of last year the board has been selling ships to pri- vate interests and sales to date include about 330 ships or but 14 per cent of the complete program. These sales represent approximately $272,000,000 or 10 per cent of the total estimated value of the fleet and 1,484,734 dead- weight tons or 18 per cent of the total tonnage. Steel cargo ships to the number of about 188 or 13 per cent of the steel vessels owned, and 65 wooden ships, or 11 per cent of the total of wooden ships, have been sold. 366 One of the deterrent influences upon sales in recent months has been the rapidly changing conditions surround. ing the disposal of the Ships, In view of the increasing tightness of the money market and the 'buying of vessels, the shipping board since the beginning of the year, has been liberalizing its terms from time to time_in order to stimulate Purchases The result, however, in many Gases has been to cause prospective pur- chasers to hold off in the hope of more advantageous later. Sales of the federal ships, during the last 14 months, have fallen into six broad classifications of ship pur- chase plans, each one of which was terms appearing subject to variations. ~. These plans Of sale included; standard terms: eash: = 'as is": discount for cash; _par- tial payment; charter purchase, and the option to purchase plan. The standard terms arrangement is known as the Hurley plan, it having been Originated by Edward N. Hurley, for- mer chairman of the shipping board. It provided for a cash payment of 25 per cent, plus 12% per cent at the end of the first six months and 12% per cent end of the first 12 months, making a total payment of 50 per cent by the end of the first year. Subsequent Payments required were 6% per cent every six months until the full pur- chase price was paid. Under this plan but five years were allowed within which to pay for the ship. During the tenure of this plan of ship sales, a new scheme frequently would be adopted only to be abolished, and the Hurley plan readopted. The charter purchase plan was evolved during the regime of John Barton Payne as chairman of the ship- ping board. As described before the senate commerce committee by D. C. Hanrahan; in charge of ships sales for the board, it was as follows: "Two and one-half per cent of the total value of 'the vessel to be sub- mitted with the proposal to purchase, and to be applied to the cost of the vessel if proposal is accepted. Bare- boat charter at $830 per deadweight ton per month jn advance. When pay- ments have reached an amount equiva- lent to 50 per cent of the purchase price, plus accrued interest at 5 per cent, title is to pass to the purchasers.