1987 Share Issue

Purpose of the Share Issue

When the FR reached Blaenau Ffestiniog in 1982 it had considerable debt in the form of a bank overdraft. In addition many aspects of its infrastructure had been completed with temporary stop-gap solutions to allow reopening with low capital cost. Examples here were sleeper crib water tower supports at Tan y Bwlch and Tanygrisiau and tin car carriages with poor passenger comfort and a limited expected life.

Structure of the Issue

In 1987 the FR Co. made an ordinary share and debenture stock issue. Subscribers had to purchase £250 of 4% debenture stock maturing in 2007 and 2012 for every £1 of ordinary shares issued. The offer was structured in this way because the FR Co. only had a limited amount of £1 ordinary shares which it was authorised to issue by its Acts of Parliament. The purpose was to eliminate the FR's bank overdraft. It was made clear that there was no prospect of receiving a dividend or of the shares acquiring any monetary value.

There was an A4 size prospectus book. It was sent out with Ffestiniog Railway Magazine No. 118 and caused the mailing of that issue of the magazine to be delayed. Within the book was an application form that could be cut out from the prospectus so as to apply for an ordinary share and debenture stock: however, rather stylishly, accompanying the prospectus was an application form printed upon a single piece of A4 paper, so that application could be made without mutilating the historical and collectable prospectus book. 1987 was the period when public interest in owning shares was at a high point with many share issues associated with privatisation of nationalised industries. Progress with the share interest was reported in Spring 1988 when over half the £400,000 sought had been raised.

Certificates and Attendance at FR Co. Shareholder Meetings

There were two attractive certificates created by Michael Seymour for the ordinary shares and the debenture stock.

Perks were receiving a copy of the Company's annual accounts and an invitation to the AGM which could be attended as an observer plus travel privileges of free third class travel on the FR for the holder and a guest.

Finance Matters

In 1987 bank base rate was about 9% so the FR Co. was probably paying about 11% on their bank overdraft. The interest rate on the debentures was a generously low 4% so at the point of issue the debentures were liable to reduce the interest cost by about 64%. In the event the result for the FR Co. was even better since much of the interest was unclaimed and written off. Between 1989 and 1998 interest paid on the 4% debentures was £39,424 but £79,136 was unclaimed. In other words the FR Co. only paid about 33% of the interest due on the debentures. The effective interest rate the Company paid was around 1% per year on the debentures because most of the holders generously did not claim the interest that was due to them.

By December 1989 £269,500 of debenture stock and £1,035 of ordinary stock had been issued. The FR Co. bank interest charges which had been £16,443 in the year ending December 1987 had decreased to nil by the year ending December 1990. In that year just £2,378 was paid in interest on the debentures.

Even better for the Company was that when the repayment of the capital became due in 2007 and 2012, 41% and 77% percent respectively was cancelled (presumably because a time limit for claiming passed) or gifted. So The company only repaid £127,250 of the £270,250 lent to it for the 4% debenture stock 2007/12.

Benefits of Shareholders

Those who invested at least £251 in 1987 are now left with £1 of ordinary stock (or multiples of that): the certificate for that stock is a beautiful work of art. They receive the FR Co. annual accounts and AGM invitations and have the right to travel for free on the F&WHR with a guest. The value of that gives a good return if they reside close enough to the railways to make frequent use of them. Some of them may also still have the certificate for the debenture stock, possibly with all of the vouchers still attached. This debenture certificate is twice the size of the certificate for the ordinary stock due to the inclusion of the vouchers and is a beautiful and interesting work of art. Each of the certificates is personalised with the name of the holder of the stock.

Future Issues?

No fundraising scheme of this type has been repeated by the Company. Modern arrangements make it more beneficial and simpler to solicit donations and claim Gift Aid where possible.

References

FR Co. Annual Reports and Accounts 1987 onwards.