CNR Financials, 1928

The historical era ...

from: History of the Canadian National Railways; GR Stevens; 1973; Macmillan.

CNR broadcasting poster from 1926.
The CNR system was the nucleus of what later became the CBC.
The Ottawa antenna location shown is the roof of the Jackson Building (Bank and Slater Streets).

from: 150 Years of Canadian Railroads: Bernard Fitzsimons; 1984; Royce Publications.

In 1928, one diesel motor is being lowered into CNR's pioneer diesel-electric 2-unit locomotive - CNR 9000.
Location: Canadian Locomotive Works, Kingston, Ontario.

from: Railways of Canada; 1973; OS Nock; A and C Black. 

Sir Henry Thornton, 1871-1933
First President of the Canadian National Railways, 1922-1932.

Born in the US, and knighted in Britain for his transportation work during the Great War,
Thornton was hounded, disgraced and dismissed by a newly-elected Canadian government for his efforts
(and spending) to reorganize and modernize the CNR.
He died less than a year after leaving his CNR post.

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Below are three pages which outline the financial condition of the CNR in 1928.

from: The Financial Post Survey of Corporate Securities; 1928; Maclean Publishing Company.

The commentary notes that there is 'no stock investment interest' in the CNR. During the railway capital crisis - which began in earnest with the Great War 1914-1918 - every spare dollar was taken out of Canadian railways and put into more profitable investments. Companies with contracts with the British government to make tin hats, 'iron rations' for the front, and ammunition would turn handsome profits. Railway lines through the sparsely-populated Canadian wilderness would only attract 'patient investors' - and there were few of those as the war got going.

Unable to raise further capital, and without enough revenue to keep the wolf (the banks) from the door, the Canadian Northern, Grand Trunk and others had their capital stock seized. Much of it had been pledged as security for loans, for government grants and through bond indentures.

The Canadian government ended up holding the railways' capital stock. To forestall legal claims from the builders/owners/shareholders, all that was left to do was to set up arbitration panels to determine the stock's 'real value'. The whole financial mess was eventually consolidated into the Canadian National Railways.

In the statements, you can see some of the interesting and descriptive old company names.

from: The Financial Post Survey of Corporate Securities; 1928; Maclean Publishing Company.

In history, railways were important in the development of modern financial techniques - taking investors' money and, in exchange, issuing security certificates - such as shares, bonds, debentures and equipment trust certificates. Previously, there had been very few businesses which needed so much investment to become established - railways needed a lot of heavy equipment and supplies to build and to operate.

• Shares evidence ownership and generally include some influence on how the business is run. In the event of a business winding up, after debtholders are paid off, the owners get the residual.
• Bonds are usually secured on particular corporate assets - the latter may be seized if there is a default on interest payments or a default on the scheduled bond redemption. 
• Debentures (are like bonds, but) are issued on the general credit of the company. Without something to seize, these creditors may be out of luck if the company's credit worsens. 
• Equipment trust certificates are secured on a particular series of rolling stock. 

Before any paper certificates were issued by the railway companies, all of the original 'securitization' was done through appropriate legal processes to satisfy investors that their money was secure at the moment it was invested with the company. 

Below is a modern version of the process of pricing and selling bonds (debt securities) to the original investors. The issuing [railway] company uses underwriters to distribute and sell their bonds - which, at face value, are priced at $100. You can see how the underwriters buy the bonds at less than face value from the company, and sell them to investors at '$100'.

from: The Canadian Securities Course; 1990; The Canadian Securities Institute.

If a company ever hopes to issue more stock or more debt securities in the future, it must be run in a prudent financial manner ...

Once the company has the original money from the underwriters, 'the market' puts its own price on each type of security. Marketable bonds (like stocks) are generally traded between investors on a secondary 'bond market' - where their prices also rise and fall like stocks. 

The pricing of marketable bonds is very complex (it's all about the 'time value of money' and what 'future payments' are worth) but, generally, if prevailing interest rates go up, the prices of bonds already issued go down - i.e. below $100. And vice versa.

Potential bond investors in 1928 would have been interested in the financial condition of the government-owned CNR. If the bonds were backed by a government (i.e. 'government guarantees') and/or they seemed like a good risk, they might prove to be a good investment. The bonds listed were all 'Outstanding in the hands of the public'.

To buy or not to buy?

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Below, you'll notice that Sir Henry Thornton is also on the board of Canada Steamship Lines.

from: The Financial Post Survey of Corporate Securities; 1928; Maclean Publishing Company.

from: Canada 1935 - The Official Handbook of Present Conditions and Recent Progress; Dominion Bureau of Statistics.

By the time the photo above was taken,
the faith of the general public in the stock market and in the financial system had been destroyed ..
by the Great Crash and the ensuing Great Depression.

Tunnel Terminal (CNR) to Central Station (CNR)

from: The Age, Melbourne, Australia, March 22, 1911

While the Grand Trunk was interested in electrification, the article is silent about the Canadian Pacific's stance on conversion of steam operations around Montreal.

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October 20, 1911 - Montreal Gazette

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Ottawa Citizen, June 12, 1912

This real estate advertisement, continued below, provides a nice map (with upstream at the top) and an overall view of the Canadian Northern project to build and finance its own downtown terminal. 

You can see the Montreal Park and Island tramway line running from downtown Montreal, around the western side of Mount Royal (above Westmount on the map), and into the shaded area named "Montreal Park". 

The Canadian Northern Railway Model City is shown at the 'northern' end of the proposed Mount Royal Tunnel and the CNR line continues west to Ottawa as it cuts between the letters 'e' and 'a' in Montre/al  [sic] Park.

The downtown passenger terminals of the Grand Trunk and Canadian Pacific can also be seen at the left of the map.

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Ottawa Citizen, June 12, 1912 (ad cont'd from above)

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Toronto Sunday World, Oct 7, 1913

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Oct 21, 1918 - The first official passenger train into Montreal leaves the south portal of the Mount Royal Tunnel just before arriving at the Canadian Northern's downtown Montreal station - generally referred to as the Tunnel Terminal.

The Canadian Northern Railway has been pushed into bankruptcy by this point - the capital necessary to keep it solvent long since drawn away by much more attractive Great War investments. 

References generally state that a flu epidemic limited attendance at this 'celebration'. From the end of September until November 7, 1918 there were 17,252 reported cases of flu in Montreal with 3028 deaths.

There may be other reasons for low attendance ..

The Great War's armistice would finally stop hostilities in just over 20 days after this event - so perhaps Montrealers also had other things on their minds. As well, this was a glorified construction site - a hole in the ground - from which was emerging a train operated by a bankrupt railway. This 1000 foot open-air run would almost immediately grind to a halt on the dead-ended tracks of the Tunnel Terminal.

Metaphors abound.

A couple of Union flags signals the movement, led by locomotive CNR 601. (At 0815hr this locomotive departed the Tunnel Terminal with the first outbound train - a six car train bound for Ottawa and Toronto.)

from: CRHA pamphlet, early 1960s.

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Montreal Gazette ad, October 18, 1918

A few days before the 'Grand Opening' above, this Canadian Northern advertisement was all business:

'Declared Ready for Traffic' .. 'In a serious time such as the present ...' 

Hooray!

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Montreal Gazette, February 1920

Permanently taking over the Canadian Northern's CNR initials, the following passenger traffic to Ottawa from the Tunnel Terminal was run by the fledgling Canadian National Railways. The route used for the service advertised below ran on the north side of the Ottawa River, crossing the Ottawa River at Grenville-Hawkesbury, to complete the rest of the journey to the south side of the Ottawa River.

The Ottawa Central Station refers to the Union Station which was located across the street from the Chateau Laurier.

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The 1928 newspaper photo below shows what an ongoing eyesore the Tunnel Terminal area continued to be through the years. The Tunnel Terminal is the white building at the centre left and the track continues roughly north into the mountain at the right side of the photo. 

The most enduring, helpful landmark for this location is St James Cathedral at the right. Inconveniently for concise historical accounts, it was renamed Mary Queen of the World in 1955. One tower of CPR Windsor Station can be seen to the cathedral dome's left.

Montreal Star, December 14, 1961, photo: 1928, collection of LC Gagnon

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Montreal Tunnel Terminal, International Post Card Co, no date - my collection.

Again, the dome of St James Cathedral helpfully orients our view. This is the street side of the Tunnel Terminal - the tailends of departing trains would be reached by walking straight through those doors. 

Faced with a quick change of ownership the postcard printer has made a rough modification to his old black and white negative: The six Canadian Northern Railway circular heralds are still present but the words 'Canadian National' has been grafted onto the singular 'Railway'. 

In fact, after the ownership change, the heralds were removed and a new 'Canadian National Railways' display replaced the old Canadian Northern lettering.

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Central Station circa July 1943, Montreal Star,  July 16, 1968 - collection of LC Gagnon.

With Central Station opening during the Second World War, much of the Canadian Northern hole was finally filled in - almost 30 years after the project began. Again, St James Cathedral orients our view. The Tunnel Terminal building is soldiering on as CNR Express offices, hidden beyond the farthest corner of Central Station.

In contrast to the 'stub end' Tunnel Terminal, Central Station's run-through design allows it to receive CNR trains from the west and south (from former Grand Trunk lines) - seen in the distance. As well it also receives trains from the north (from the former Canadian Northern Tunnel line) - from behind the camera. 

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One of the original Canadian General Electric locomotives used by the Canadian Northern near the south portal. CNR photo circa 1940, collection of LC Gagnon.

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Central Station CNR pamphlet c1943, collection of LC Gagnon.

This illustration is from a booklet issued by the CNR on the occasion of Central Station's opening. This illustration was designed with an overlying page showing generic cracker-box office buildings standing over the underlying tracks and station.

Again, look for St James Cathedral. The southern tracks are in the foreground. The Tunnel-bound tracks disappear under buildings to the right.

Give yourself extra points if you spotted the long-suffering Tunnel Terminal beside the "MAN" in Mansfield. Its armchair shape lines up with the tracks disappearing into the Tunnel. It was torn down in 1952.

South Portal, Railroad Magazine Aug 1952

At some point in Central Station's development, this interesting photo was published in an American magazine.  

Montreal Star, Inside Scene, Sep 13 1975 - collection of LC Gagnon 

With Mary Queen of the World Cathedral unchanged from the previous views (green domes), a more modern 1975 view of Montreal's combined Central Station and tunnel station shows .. that it can't be seen at all.

The photo comes from an article promoting local sightseeing by helicopter and small plane. The modern mystery of the actual location of the Central Station building and how the trains get into the tunnel is established.

Epilogue

The following book was put out in the wake of the Great War. It follows the nationalization of the Canadian Northern, but predates the absorption of the Grand Trunk into the government's crown corporation in 1923. The actual book is not as fascinating as its moment in history .. 

Whether they were putting together a descriptive commemorative timetable for a Royal Tour or a guidebook for the travelling public, the railways often used the same boilerplate historical descriptions (esp. 'It is said that .. ') and the same worn-out 'postcard' images.

Regarding the various railway lines radiating from Montreal circa 1920, there isn't really a Montreal-centric explanation of where lines go.

Montreal's status as Canada's farthest-inland ocean port, as Canada's metropolis and as Canada's railway capital are not described in this book.

from: Canada, Pacific to Atlantic, The National Way, c1920, Canadian National Railways - my collection

map from: Canada, Pacific to Atlantic, The National Way, c1920, Canadian National Railways - my collection

On the other hand, the impossibly graceful and efficient railway arcs do help to place Montreal in the context of its nascent Canadian National network.

• Two ex-Canadian Northern lines align westerly for Ottawa and Huberdeau after trains pass through the Mount Royal Tunnel.
• One other ex-Canadian Northern line aligns easterly for Quebec City from the Moreau Street Station.
• Grand Trunk (soon to be CNR) double-track lines depart Bonaventure Station for Toronto, or St Lambert and points east.

CNR Gohier - Oct 3, 1964, looking north.

Although not on the original Canadian Northern track at this point, our trip: Fall Foliage '64 does demonstrate the ritual of cutting off the tunnel power and replacing it with steam. In this case, the excursion originated at Central Station and is bound for Grand'Mere/Garneau - to be repeated tomorrow (Sunday) as well.

The English Electric-built 187 is the trailing locomotive of two now in the clear on the 'stub track' at Gohier.

The proudly-railway-owned CNR 6218 is now waiting to reverse onto its train.

The usual trench-coated CNR Road Foreman, always present on these trips, is in the foreground. Railfan patrons on the trip haul their film-loaded cameras and reel-to-reel audio equipment to record the event.

CNR Gohier Oct 3, 1964, looking south.

This muddy black and white view shows the actual train and its location. The consist has not moved and 6218 has now coupled on to it.

Using 1970 references:

• Our electric-powered train travelled straight west from Central Station and through the Mount Royal Tunnel. 
• At EJ Tower (East Junction) you can see our steam power as it faces north - the rest of our train curls around about 90 degrees, with its tailend still on the Mount Royal Sub.

• We will be heading north and north-east on the St Laurent Subdivision until we approach the downstream end of Montreal Island. 
• Soon after that, we will be on the former Canadian Northern route to Joliette etc.

(A 1972 CNR employee timetable map is shown in the listing of posts at the top of this page.)

Beyond those details, notice the train order signal settings and how nonchalant everyone is as they crowd up against 6218.