Midland Railway of Canada - Financial Matters

Financial Matters

The Midland Railway had started the 1870s in good financial condition. In 1870 its receipts were $242,157 against expenses of $113,227, an Operating Ratio of 47%. In 1872 Frank Shanly was awarded a contract to build a fifty-three mile extension from Beaverton to a terminus on Georgian Bay at Midland. There were unforeseen difficulties with the ground and a rapid increase in labour costs, which ruined Shanly. The Midland was financially strapped, could not afford to pay Shanly for the extras, and seized the contract back in February 1873. At the same time the recession hit freight receipts which fell by 30% between 1872 and 1874. The first Midland Railway manager D’Arcy E. Boulton of Cobourg, Ontario was replaced by Adolf Hugel of Pittsburgh. Hugel invested money in steel rails and struggled to cut costs. In recognition of his efforts to improve the line the British bondholders agreed in 1874 to lower the rate on their investments, and not to cash the interest coupons.

Net earnings and the ability to pay interest on the fixed debt declined sharply after 1875, the Midland was insolvent and the ownership of the line essentially passed to the bondholders. The Chairman of their Committee was Sir Henry Tyler of the Grand Trunk Railway and most of the other members were GTR nominees. When George Albertus Cox, a prosperous insurance agent for Canada Life and several times Mayor of Peterborough, took over as President of the MR in August 1878 it was soon apparent that here was a character with a natural affinity for making money who would shake things up. He vowed on his first day with Canada Life that he would become its President, which he did in 1900, and his insurance branch in Peterborough was soon doing half the company’s business.