Full opinion text
HEMPHILL, District Judge. Petitioner, seeking approval of its proposed plan of composition of outstanding indebtednesses allegedly in default, exhibited, on August 25, 1964, its petition, together with exhibits and references, alleging justification of same. The action is pursued under the provisions of Title 11, Chapter 9, United States Code. This Chapter, formerly known as Chapter X of the Bankruptcy Act, insofar as sections 401-404 thereof are concerned, have been declared valid and constitutional by the Supreme Court of the United States. See United States v. Bekins, 304 U.S. 27, 58 S.Ct. 811, 82 L.Ed. 1137. The United States Constitution confers the power on Congress to enact necessary statutes. Title 28, United States Code, § 1334 provides: “The district courts shall have original jurisdiction, exclusive of the courts of the States, of all matters and proceedings in bankruptcy.” The fact that the Constitution allows and the National Legislature enacts in accordance with its authority, however, does not enlarge the authority of those seeking relief to exceed the limitation imposed by statute. Within those limits this Court may proceed to render interlocutory decree, retaining such jurisdiction as may be necessary to implement, or carry out the provisions or directions of such decree. With such in mind this Court accepted and assumed jurisdiction. York County Natural Gas Authority was originally created by the General Assembly of South Carolina in 1954, the Act was later amended April 6, 1957 to function under changed circumstances which effectually substituted Carolina Pipeline Company as supplier of gas in place of Transcontinental Gas Pipeline Corporation. Pertinent parts of the Act as amended are: “SECTION 1. Section 1 of Act 959 of 1954, amended — -York County Natural Gas Authority created.— Section 1 of Act No. 959 of the Acts of 1954, is amended to read as follows: “Section 1. There is hereby created a body corporate and politic of perpetual succession to be known as the York County Natural Gas Authority (hereinafter sometimes referred to as the authority). It shall be the function of the authority to purchase, lease, acquire, build, construct, maintain and operate natural gas distribution systems within the service area hereinafter defined and such transmission lines as may be necessary to transport natural gas to the distribution systems from the transmission lines to be constructed by Carolina Pipeline Company or other sources from which natural gas may now or hereafter become available, which transmission lines and distribution systems will serve persons, firms, corporations, municipal corporations, and any subdivision or division of the State located In and nearby to each of the incorporated municipalities of Clover, York, Rock Hill, Fort Mill or any other municipality or thickly populated area in York County. The transmission lines, distribution systems, their component parts, all apparatus, equipment and property incident thereto or used or useful in the operation thereof, and all additions, improvements, extensions and enlargements to any of the same, shall henceforth be referred to collectively in this act as the system. The authority shall have the further functions and duties prescribed by this act, and shall have all of the powers herein granted. “SECTION 2. Service area further. — The Authority shall be empowered to furnish natural gas service throughout the County of York, and, for the purposes of this Act, the area of such county shall constitute the Service Area of the Authority. * * -X- * -X- “SECTION 4. Powers and duties. _ * * * “a. To sue and be sued. ***** “c. To make bylaws for the management and regulation of its affairs, and to define a quorum for its meetings. “d. To acquire, purchase, hold, use, lease, mortgage, sell, transfer and dispose of any property, real, personal or mixed, or any interest therein. ***** “e. To purchase, lease, acquire, build, construct, maintain and operate distribution systems within its service area and such transmission lines as may be necessary to serve the distribution systems and from time to time enlarge and extend such distribution systems and transmission lines. “ * * * * * “g. To enter into contracts of long duration for the sale of interruptible gas only, but all of such contracts shall contain a provision permitting the Authority to increase the price charged its customers for gas if the Authority, in turn, shall be required to pay more for its gas than it did on the occasion that such contract was entered into, and no contract of any sort shall be entered into which shall not in all respects be subordinate to any covenant or undertaking which the Authority may make in the proceedings taken in connection with the issuance of any bond or other obligation of the Authority. And, no contract of any sort shall be made respecting the sale of firm gas, which shall be sold in accordance with such schedule of rates as shall from time to time be in effect. •3s* -3r "X- “1. To appoint officers, agents, employees and servants, prescribe the duties of such, fix their compensation, and determine if and to what extent they shall be bonded for the faithful performance of their duties. “m. In its discretion, to employ any person or corporation to operate its System for any fixed period of time, upon such terms and conditions as the Authority may deem proper. * * * * * “o. To borrow money and to make and issue negotiable bonds, notes, and other evidences of indebtedness, payable from all or any part of the revenues derived from the operation of its System. The sums borrowed may be those needed to pay all costs incident to the construction and establishment of the System, and any extension, addition, and improvement thereto, including engineering costs, construction costs, the sum needed to pay interest during the period prior to which the System, or any extension, addition or improvement thereto, shall be fully in operation, such sum as is needed to supply working capital to place the System in operation, and all other expenses of any sort that the Authority may incur in establishing, extending and enlarging the System. Neither the faith and credit of the State of South Carolina, nor of the municipalities of Clover, York, Rock Hill and Fort Mill, in York County, shall be pledged for the payment of the principal and interest of the obligations, and there shall be on the face of each obligation a statement, plainly worded to that effect. Neither the members of the Authority, nor any person signing the obligations, shall be personally liable thereon. To the end that a convenient procedure for borrowing money may be prescribed the Authority shall be fully empowered to avail itself of all powers granted by Sections 59-361 through 59-415 and 59-651 through 59-682, Code of Laws of South Carolina, 1952, as now or hereafter constituted, it being the intent of this provision that further amendments and modifications of these Code provisions shall be deemed to amend and revise correspondingly the powers granted by this paragraph. In exercising the powers conferred upon the Authority by such Code provisions, the Authority may make all pledges and covenants authorized by any provision thereof, and may confer upon the holders of its securities all rights and liens authorized by such Code provisions. Specifically, and notwithstanding contrary provisions in any of such Code provisions, if contrary provisions there be, the Authority may: “(1) Provide that such bonds, notes or other evidences of indebtedness be payable, both as to principal and interest, from the net revenues derived from the operation of its System, as such net revenues may be defined by the Authority. “(2) Covenant and agree that upon it being adjudged in default as to the payment of any instalment of principal or interest upon any obligation issued by it, or in default as to the performance of any covenant or undertaking made by it, that in such event the principal of all obligations of such issue may be declared forthwith due and payable, notwithstanding that any of them may not have then matured. “(3) Confer upon a corporate trustee the power to make disposition of the proceeds fi-om all borrowings and of all revenues derived from the operation of the System, in accordance with the resolutions adopted by the Authority as an incident to the issuance of any notes, bonds or other types of securities. “(4) Dispose of all obligations at public or private sale, and upon such terms and conditions as it shall approve. “(5) Make such provision for the redemption of any obligations issued by it prior to their stated maturity, with or without premium, and on such terms and conditions as the Authority shall approve. “(6) Covenant and agree that any cushion fund established to further secure the payment of the principal and interest of any obligations shall be in a fixed amount. * * * -X- -X- “(8) Prescribe the procedure, if any, by which the terms of the contract with the holders of its obligations may be amended, the number of obligations whose holders must consent thereto, and the manner in which such consent shall be given. “(9) Prescribe the events of default and the terms and conditions upon which all or any obligations shall become or may be declared due before maturity and the terms and conditions upon which such declaration and its consequences may be waived. “SECTION 5. Disposition of revenues. — All net revenues derived from the System, whose disposition the Authority shall not have covenanted or contracted to otherwise dispose of, shall be paid over to York County and to the municipalities which may from time to time be served by it, including the municipalities named and others that may later be served by the System of the Authority, such county receiving a share thereof in the proportion that the per annum consumption of gas outside of the incorporated areas therein bears, and each municipality receiving, a share thereof in the proportion that the per annum consumption of gas therein bears to the aggregate per annum consumption of gas by the entire Service Area of the Authority.” Petitioner, whose authority so to do is not here an issue, thereafter came into being by the appointment of personnel, various contracts, negotiations, building, etc., and issued revenue bonds, with interest payable thereon, which, at time of commencement of this action had admitted status as follows: (a) $2,762,000 of Natural Gas System Revenue Bonds, dated September 1, 1957, bearing interest at six separate rates, and varying from 5% to 5.80%, which has not been paid since the interest payment date of March 1, 1961, and is due from such date at the respective rates borne by such bonds. (b) $450,000 of Natural Gas System Revenue Bonds, dated September 1, 1958, bearing interest at six separate rates, and varying from 5% to 5.80%, which has not been paid since the interest payment date of March 1, 1961, and is due from such date at the respective rates borne by such bonds. (c) $422,000 of Natural Gas System Revenue Bonds, dated July 1, 1959, bearing interest at six separate rates, and varying from 5% to 5.80%, which has not been paid since the interest payment date of March 1, 1961, and is due from such date at the respective rates borne by such bonds. (d) $144,000 of Natural Gas System Revenue Bonds, dated October 1, 1960, bearing interest at 6%, which has not been paid since the interest payment date of September 1, 1962, and is due from such date at the rate borne by such bonds. In addition, Petitioner had borrowed to meet coupons due on the bonds as follows : (e) $95,758 for moneys advanced to Petitioner by certain of those who purchased the Outstanding Bonds, used by Petitioner along with its own moneys available, therefore to meet the March 1, 1961 coupons on the Outstanding Bonds described in subparagraphs (a), (b) and (e) above. It is over the composition of this indebtedness that this controversy ensues. Despite the fact the obligations were in default since the payment of March 1, 1961, Petitioner has operated the system and continued expansion and development of the system, but it does not have the funds, in being, or in prospect to fully develop its alleged and hoped-for potential or to make improvements. On March 6, 1964, the Governor of South Carolina approved Act #1373 of the Acts of the South Carolina General Assembly, which empowered the Authority to refund its outstanding bonds, to fund its other indebtedness, to raise money for improvements, Sections 2 and 3 of which provided : “SECTION 2. Authority may issue and exchange bonds. — -The Authority is hereby authorized to issue, pursuant to Sections 59-651 to 59-682, inclusive, of the 1962 Code, such amount of bonds as it may from time to time hereafter deem necessary in order to exchange such bonds for those of the Authority now outstanding, and in order to provide funds for improvements and extensions to the system of the Authority. The bonds may be disposed of by the Authority on such terms as the Authority shall approve and at a discount, if the Authority shall find such a method to be to its advantage. The Authority is expressly empowered to employ such persons or firms of investment bankers as it may deem desirable in effecting the exchange of its outstanding bonds, and to use the proceeds of any bonds that might be sold to pay for the services of such individuals or investment bankers. The Authority is further authorized to issue funding bonds or certificates of indebtedness to such extent as it may deem necessary to fund all arrears of interest. Such funding bonds or certificates of indebtedness shall have such claim to the revenues of the system as the Authority shall provide. “SECTION 3. P a y m e n t. — All bonds of the Authority now outstanding and the bonds and certificates of indebtedness of the Authority to be hereafter issued pursuant to the authorization of this and other acts relating to the Authority are hereby declared to be valid and binding obligations of the Authority ae- . cording to their respective tenor and effect. Such bonds and certificates of indebtedness shall be payable solely from the revenues derived from the system of the Authority and shall have such claim thereto as shall be prescribed in the proceedings of the Authority providing for their issuance.” While this Court does not determine such act necessary to the proceeding hereunder, there remains no question of the sanction of the State Authority. On April 16, 1964, the Authority, pursuant to authority granted to it in the 1954 Act of the South Carolina General Assembly, supra, and the 1964 Act hereinabove set forth as sanctioning debt refunding or composition, unanimously passed “A Resolution Providing for the Issuance and Sale of Four Million Three Hundred Thousand Dollars York County Natural Gas Authority Refunding and Improvement Revenue Bonds dated March 1, 1964,” contemplating as composition refunding: (a) The issuance of $4,300,000 of Natural Gas System Refunding and Improvement Revenue Bonds of the AUTHORITY (the BONDS). The BONDS shall be dated March 1, 1964 and shall mature on March 1, 1994. (b) The use of BONDS to the extent of $3,778,000 in exchange for the $3,778,000 of OUTSTANDING BONDS; (c) The sale of $522,000 of BONDS to the INVESTMENT BANKERS in order to provide funds with which to pay expenses incident to the refunding plan and to pay for improvements and extensions to the SYSTEM; and (d) The issuance of fully registered certificates of indebtedness (the CERTIFICATES), whose obligation shall* be junior and subordinate to the BONDS, certain prior lien bonds authorized (but not issued) by the RESOLUTION, and bonds hereafter issued on a parity with the BONDS. Such CERTIFICATES will not bear interest and will be repayable only in the manner provided by the RESOLUTION. The Resolution sets forth manner and means of bond exchange, and detailed such items as definitions, and other administrations incidental to, but not absolute on the issue of approval or disapproval now before the court. Prior to the South Carolina Legislative Act of 1964, in anticipation of the necessity of re-financing, Petitioner had entered into a “Refinancing Agreement”: “STATE OF SOUTH CAROLINA COUNTY OF YORK REFINANCING AGREEMENT THIS AGREEMENT between the YORK COUNTY NATURAL GAS AUTHORITY, A Municipal corporation organized under the laws of the State of South Carolina (Hereinafter called the “Authority”), and HERBERT J. SIMS & COMPANY, INC., Investment Bankers, 52 Wall Street, New York, N. Y., and WATKINS, MORROW & COMPANY, Investment Bankers, Woodward Building, Birmingham, Alabama, (hereinafter referred to as the “Bankers”), WITNESSETH : RECITALS WHEREAS, the Authority has outstanding $3,778,000 Natural Gas Revenue Bonds; and WHEREAS, The Authority is in default on the payment of principal and interest thereon; and WHEREAS, it is in the best interest of the Authority and the Bondholders for a plan of refinancing to be worked out which is acceptable to the Authority; and WHEREAS, it is in the public interest for the Authority to employ financial consultants with many years of experience in financing of Natural Gas Revenue Bonds; and WHEREAS, the Bankers have had many years of such experience; NOW, THEREFORE, in consideration of $10.00 paid each to the other, receipt of which is hereby acknowledged, the parties hereto do hereby mutually contract and agree as follows: 1. THE BANKERS AGREE: A. To accept employment as the exclusive irrevocable agent of the Authority, for the purposes and during the time herein set forth, and to use their best efforts to carry out the purposes of this Agreement. B. To prepare a plan of refinancing of the indebtedness of the Authority. Such plan shall include, among other things, recommended rate or rates of interest for the Refunding Bonds, a plan for the Authority to generate cash funds for badly needed extensions and improvements, and a plan to handle bonds which the present owners may not be willing to exchange. A plan acceptable to the Authority must be submitted to the Authority by the Bankers within 30 days from date, failing which the Authority may elect to terminate this agreement by giving to the Bankers immediately effective notice in writing of such termination. C. That the plan for obtaining cash for the Authority may include a purchase of Revenue Bonds by the Bankers. In such circumstances, the Bankers would be acting in somewhat of a dual capacity but with the approval of the Authority. D. Upon approval by the Authority of the original or amended refinancing plan submitted, to use their best efforts to arrange a joint meeting with the known owners of large amounts of the presently outstanding Revenue Bonds of the Authority, within 30 days thereafter. Those in attendance would be representatives of the Authority, of the Bankers, of the Authority’s Engineers, of the original leading underwriters of the bonds and of any principal bondholders designated by the Authority. ■ i E. To furnish to the Attorneys of the Authority hereinafter mentioned the principal ingredients required for a new Resolution for such proposed financing program including, among other things, rate or rates of interest, maturity schedules, flow of funds of the Authority, redemption features, etc. F. To charge for expenses and services a fee for bonds which may be exchanged under the refinancing program of 2%% of the principal amount of such bonds actually exchanged. Out of this amount will be paid the necessary fees to other investment Bankers, including if feasible and possible the original leading underwriters of the Bonds, for assisting in an exchange program. G. To purchase for cash at 97%% of par plus accrued interest up to $1,000,000 principal amount of bonds. Such bonds shall either be those not exchanged or for cash for extensions or a combination of both. The rate or rates of interest on such bonds are to be mutually agreed upon at the time that the refinancing program is put into effect. Unless otherwise approved in writing by the Authority, not less than $500,000 of the $1,000,000 principal amount of bonds to be purchased for cash by the bankers shall be applied to payment of the costs of such extensions to and improvements of the existing gas system as may be designated by the Authority. H. To consummate and put into effect the refinancing plan within 12 months from date of approval thereof, or either party hereto may cancel this Agreement by giving to the other immediately effective notice in writing thereof. In the event that no Refunding Bonds or new bonds are issued, the Authority will owe the Bankers nothing for their services, regardless of the cause of such non-issue of Bonds. I. That subject to approval by the Bankers of the adequacy and sufficiency of extensions and improvements proposed by the Authority, funds therefor in the amount of not exceeding $500,000 may be provided by the Authority, at its election, through issuance and sale to other than the Bankers of revenue bonds having parity with other bonds of the Authority issued and sold to the Bankers or exchanged with existing bondholders. 2. THE AUTHORITY AGREES: A. To employ the Bankers as its exclusive irrevocable agent, for the purposes and during the time herein set forth, to use their best efforts to carry out the terms and intent of this Agreement. B. To furnish without cost all resolutions, indentures of trust, etc., which may be required to legally authorize, issue and sell the proposed bonds. C. To furnish without cost the approving legal opinion of Messrs. Sinkler, Gibbs & Simons, Attorneys, Charleston, S. C. D. To furnish without cost the new bond blanks. E. To pay the charges of the Bank acting as Depository and Trustee under the refinancing plan, after initially approving in advance the designation and the amount or basis of such charges. F. To approve the Bankers acting as Agent and as Purchaser under such refinancing plan. G. In the event that no bonds are issued, either for refinancing or for new money, then nothing is to be paid the Bankers for their services, regardless of the cause of such non-issue of Bonds. H. In the event that the plan is not consummated within 12 months from date, then either party hereto may cancel this Agreement, by giving to the other immediately effective notice in writing thereof. IN WITNESS WHEREOF, the parties hereto have set their hands and seals on this the 19th day of September, 1963. YORK COUNTY NATURAL GAS AUTHORITY By: /s/ W. Ben Dunlap W. Ben Dunlap, Chairman Attest: /s/ B. A. Lewis B. A. Lewis, Secretary HERBERT J. SIMS & COMPANY, INC. WATKINS, MORROW & COMPANY By: /s/ Hugh Morrow, Jr. Authorized Representative” The “Bankers”, in turn, had submitted a proposed refunding plan: HERBERT J. SIMS & CO., Received INC. 12-16-63 “YORK COUNTY NATURAL GAS AUTHORITY PROPOSED REFUNDING PLAN In accordance with the Refinancing Agreement, Section 1, Paragraph B, dates September 19, 1963 between the undersigned and the York County Natural Gas Authority, South Carolina, we, your Bankers, propose that the Authority approve the following refinancing plan to be submitted to the Bondholders, subject to the approval as to legality by Messrs. Sinlder, Gibbs & Simons, Charleston, South Carolina. Details of Refunding Bonds 1- Date of Issue: March 1, 1964 2- Maturity: March 1, 1994 3- Denomination: $1,000 4- Form: Coupon Bonds, Registerable 5- Call Features: Sinking Fund and Refunding @ 102 and interest on any interest payment date upon 30 days notice 6- Paying Agents: (a) Citizens & Southern National Bank (b) Co-paying agent Empire Trust Co., N. Y. 7- 4% for 3 years, 4%% thereafter Method of Handling Total Past Due Interest 1- Registered Bonds dated March 1, 1964, due March 1, 1995 2- Non-interest bearing Bonds 3- Record of registered holders in Citizens & Southern National Bank, Columbia, S. C. 4- Payments to be made proportionately to reduce face amount 5- Reregisterable so as to be transferable and marketable Bond Resolution 1-Flow of Funds (A) Daily deposits into Gross Revenue Fund (B) Operating Expenses (C) Balance of Revenues to Reserve Fund for a period of 3 years until maximum of $200,000 has been deposited (1) * (D) Beginning in 4th year, 50% of balance to Reserve Fund until maximum of $200,000 has been deposited (2) * (E) Beginning in 4th year, 50% of balance to Renewal and Extension Fund up to a maximum of $40,000 in any one year (2) * (F) Balance to Bond Redemption Fund (G) Beginning in the 10th year, 10% of the surplus or balance to make payments on registered bonds due March 1, 1995 after payment of interest and the annual maximum payment of $40,000 to the Renewal and Extension Fund and provided the Reserve Fund contains its maximum of $200,000 (H) After all Refunding Bonds have been paid on March 1, 1994, the balance remaining after payment of operating expenses and the maximum annual payment of $40,000 to the Renewal and Extension Fund, will be used to pay unpaid balance of the registered non-interest bearing Bonds due March 1, 1995 (1) * Or until new bond proceeds for construction are expended (2) * To begin if new bond proceeds for construction are expended prior to estimated 3 year construction period Form of Refunding and Improvement Bonds 1- Date of issue: March 1, 1964 2- Maturity: March 1, 1994 3- Denomination: $1,000 4- Form: Coupon Bonds, registerable 5- Call features in numerical order semi-annually (A) Sinking Fund March 1,1969 @ 103 (B) Refunding March 1, 1974 @ 105%, on any interest payment date thereafter 6- Interest rate: 5%% 7- Payable from the same flow of funds as Refunding 4-4%% Bonds Miscellaneous Resolution Provisions to Modify Present Resolution 1- No consulting engineer so long as Charles Stafford is employed by the Authority, unless one year’s unaccounted-for-gas exceeds 10% excepting Force Majeur 2- Authority will choose Certified Public Accountants 3- Issue Equal Lien Bonds based on 2 previous years net revenues covering not less than maximum interest of present outstanding bonds and. new bonds to be issued 2 times without any limitation by the registered bonds issued for past due interest 4- Deposit of surplus funds up to $50,-000 in the Reserve Fund and up to $50,000 in the Operation and Maintenance Fund for operating capital, balance, if any, to the Reserve Fund 5- Annual budget to be approved by Bankers and/or Consulting Engineer 6- Resolution to permit issuance of transmission line bonds payable as an operating charge 7- After setting aside 3 months operating expense for use as capital, balance of cash on hand to be placed in Reserve Fund up to the maximum required 8- New Construction Fund monies until expended as additional security for payment of interest 9- Minimum interest coverages after completion of refunding: Year 1 — ■ 110%, Year 2 — 120%, Year 3— 130%, Year 4 — 140%, and thereafter — 150% 10- Modification of Construction Fund clauses to conform to new consulting engineer clause 11- 10% of the holders of outstanding bonds may sue Procedure and Technique of Refunding 1- Bonds to be exchanged number for number 2- A specified number of bonds must be called annually prior to purchase or call for tenders by the Authority 3- Upon agreement of interest rates, treatment of back interest, Connecticut Mutual to write to the Authority declaring all bonds due and payable 4- Meeting with representatives of White, Weld & Co., Robinson Humphrey & Co., Alester Furman & Co., B. J. Van Ingen & Co., Inc., J. R. Williston & Beane (formally Clement Evans & Co.), to explain details of refunding plan, ask for cooperation 5- Appointment of Citizens & Southern National Bank, Columbia, S. C. as escrow and exchange agent 6- Print exchange agreements and prospectus, give history, projections of revenues and customers 7- Solicit deposits through all sources, dealers, paying agent, banks, etc. 8-Upon deposit” of $3,278,000 or more bonds, effect exchange and pay for $500,000 Refunding and Improvement bonds and up to $500,000 Refunding bonds Economic Reasons for Exchange 1-The combination interest rates of 4-4%% for the Refunding bonds and 5%% for the Refunding and Improvement Bonds show: Maximum (A) Year Projection Interest Coverage 1 $205,454 $200,010 1.03 X 2 $227,548 $200,010 1.14 X 3 $257,791 $200,010 1.29 X (B) Based on the Flow of Funds previously outlined including the payment of back interest, all of the bonds will be retired in 1986 and the back interest will be paid in full by 1989 (C) The proceeds of the $500,000 Refunding and Improvement Bonds is estimated will provide sufficient funds to pay the expenses for the refunding and finance the 3 year improvement program now contemplated by the Authority (D) Upon completion of the exchange, we believe that after one year of operation the credit of the Authority will be reestablished, thus enabling it to negotiate authoritatively with large potential gas customers (E) It should place the Authority in a strong position to negotiate with Carolina Pipe Line Company relative to the sale of gas to Rock Hill Finishing Company and the Celanese Corporation Copy of Bond Amortization Table attached: 1- Based on full amount, $1,000,000 of Refunding and Improvement bonds to be issued 2- Based on projection of increased revenues with present capital expenditures for ten years No consideration is given to the higher expenditure of the proceeds from the new 5%% Refunding and Improvement Bonds. Respectfully submitted, WATKINS, MORROW & CO. HERBERT J. SIMS & CO., INC.” In effect this plan sets up the proposed outline of machinery for accomplishing the borrowing the Authority Resolution of April 1964 details. It is undisputed that the allegation of the petition as to its financial difficulty are true, VIZ: “3. That Petitioner encountered a number of unforeseen difficulties in creating and establishing its gas system, including particularly (a) unavoidable delay in financing with resultant loss of one year’s anticipated heating season revenues, (b) unanticipated additional construction costs, and (c) exhaustion of maximum allowable capitalized interest funds before generation of sufficient earnings to meet interest cost out of current revenues available after payment of operating costs: and that as a result thereof Petitioner is in default under the terms of its Bond Resolution and Supplements and the requisite number of bondholders have declared all Outstanding Bonds forthwith due and payable pursuant to the requirements of said Resolution and Supplements.” “4. That the revenues pledges for payment of the Outstanding Bonds described above are inadequate to pay said Bonds and the interest thereon as the same mature, after first providing for necessary operating costs; that because of its default Petitioner is unable to obtain necessary funds with which to meet an ever increasing present demand for gas service, particularly in newly established outlying residential developments seeking gas service for central heating, hot water heating and cooking requirements; and that a long period of restricted growth and continued default, with serious limitation upon its ability to properly serve the public and to meet its obligations to its bondholders, will ensue * * *. Upon affidavit that 85% of the affected creditor bondholders had approved the petition, the Court ordered same filed and fixed a hearing date as provided in 11 U.S.C.A. § 403, sub. b, setting time at 10:30 A.M. October 30, 1964 at Green-ville, S. C. Protestant J. P. Mozingo thereafter filed his petition of protest alleging : “(t)hat he is the owner of certain Bonds, that he received no prior notice of this proceeding although a known bondholder-creditor, that he is dissatisfied with the proposed Plan of Composition, and that he proposes an alternate plan suggested by others (not specified as creditors or bondholders) which he avers is better designed for protecting Petitioner and/or other bondholders. He cited the potential he subscribes allegiance to as Carolina Pipeline Company, not therefore identified with the Plan of Composition as creditor, or approved source of relief, or a party of interest to the proposed plan, pleading the same as the source of guarantee of his security, his solvency as creditor, insofar as his investment is concerned.” On October 21, 1964, ratifying previous verbal assurance by this court, on order decreed: “James P. Mozingo, III, will be accorded all rights granted by statute to any objecting bondholder * * The Court further provided: (Protestant) “must have his day in court.” This he has had, and the hearing has been recessed and reconvened from time to time to accomplish full exploration. The Court must first face the issue of “who”, or “what” is authorized by the National. Statute. Section 401 of Title 11 (Chapter 9) provides: “This title and proceedings thereunder are found and declared to be within the subject of bankruptcies and, in addition to the jurisdiction otherwise exercised, courts of bankruptcy shall exercise original jurisdiction as provided in this chapter for the composition of indebtedness-es of * * * (6) incorporated authorities, commissions, or similar public agencies organized for the purpose of constructing, maintaining, and operating revenue-producing enterprises.” Section 402 of Title 11 defines confines: “The term ‘petitioner’ shall include any agency or instrumentality referred to in section 401 of this title.” In the light of this statutory guidance the court examines the statute or status of protestant Mozingo, and Carolina Pipeline. Petitioner is included in the limits of as to a “public” agency, and the statute so limits. The legal test between a private or public authority or agency is whether the authority or agency is subject to control by public authority, state or municipal. The South Carolina Court, in distinguishing the term “public” from “private” noted in State ex rel. Railroad Co. v. Whitesides, 30 S.C. 579, 9 S.E. 661, 663: “What is the meaning of the term ‘public’ ? This term is opposed to the term private, and, according to the best lexicographers, means ‘pertaining to, or belonging to, the people; relating to a nation, state, or community.’ ” Petitioner meets the test of the statute. Protestant Mozingo, sponsoring a plan of composition which was, and is, effectually, Carolina Pipeline Company’s hope to gain control of the Petitioner, does not meet the test. Nor do Carolina Pipeline Company, and Thornton, Farish & Gauntt, Inc. its proposed investment bankers in this controversy meet the test. They are classified as “private”, without the permission of Section 401 of-Title 11. The fact that Protestant Mozingo cannot present a plan as petitioner does not in any way prevent his acting as creditor, per se, through counsel, or associate counsel, and with advisers, as he was and is permitted to do. In the hearings at Greenville and Rock Hill he was accompanied by various persons, specialists and otherwise. The court takes judicial notice of the fact that any plan of composition would “affect his interest materially,” and of the provisions of the Chapter which provide: “The ‘plan of composition’, within the meaning of this chapter, may include provisions modifying or altering the rights of creditors generally, or any class of them, secured or unsecured, either through issuance of new securities of any character, or otherwise, and may contain such other provisions and agreements not inconsistent with this chapter as the parties may desire.” (Emphasis added) Before concluding the hearing in the matter, this Court reviewed the transcribed testimony, contracts, proposals, acceptances, deposit agreements, and all other papers relating to the plan and presented to the Court by Petitioner and/or protestant. Additionally, a hearing was held in the Rock Hill Division of the United States District Courts for the Western District of South Carolina, on January 23, 1965 to determine a method of transferring the bonds, pendente lite, without creating confusion because of the surrender to the transfer agent, or fiscal agent. A copy of that order is attached hereto as Appendix IV hereof. The Court now turns to the interlocutory order of approval or disapproval of Petitioner’s plan and any modification thereof in the light of issues raised. At the time the original order approving the filing of the Petition for Composition the Court made a prima facie finding, upon proper and verified showing, that some 85% of the affected creditors, representing substantially more than the required percentage of (51%) required by statute, had approved the Plan of Composition in writing. This approval was accomplished by the surrender of the bearer bonds, accompanied by a consent, as described in appendix II hereof, to the fiscal agent, Citizens & Southern National Bank, Columbia, S. C. At the date of the initial hearing in Greenville this had increased to more than 90%. Protestants presented requests for withdrawal which, if allowed, would have reduced this figure to 85.2% at that hearing and 74.4% at conclusion of the hearing. Thus the necessary jurisdictional fact of the 51% was clearly established, and is no longer at issue. The Court, however, continues to act in reliance thereon and upon additional consents initially given, and such consents may not be withdrawn or changed except by leave of this Court on proper cause. The applicable statutory provisions establish procedure for withdrawal of consent only in the event of change or modification of the Plan of Composition submitted by Petitioner, which has not occurred. The statutory establishment of specific withdrawal procedure under specific conditions negatives the existence of withdrawal procedure by any other means or under any other conditions. This proposition is supported by the well recognized maxim: “Expressio unius est exclusio alterius.” It is also supported by the holding of the United States Supreme Court in the case of Raleigh & G. R. Co. v. Reid, 13 Wall. 269, 80 U.S. 269, 20 L.Ed. 570, wherein the Court said : “Vv^hen a statute limits a thing to be done in a particular mode, it includes a negative of any other mode.” Aside from the statutory limitation on withdrawals there exists the further limitation imposed by the fact that when the Petitioner and 51% or more of its creditors join together in asking the Court to consider and approve the Plan of Composition, and in this case 85% of the creditors had so joined at the time of filing of the Petition, there is created thereby an obligation in the nature of a contract or agreement. Having become properly bound thereby, a creditor may not be relieved of this obligation at his own whim, and any such relief must be for cause and with the assent of the Court. In Wells Fargo Bank & Union Trust Co. v. Imperial Irr. Dist., C.C.A.Cal. 1943, 136 F.2d 539, 54 Am.Bankr.Rep. N.S. 58, certiorari denied 321 U.S. 787, 64 S.Ct. 784, 88 L.Ed. 1078, rehearing denied 322 U.S. 767, 64 S.Ct. 940, 88 L.Ed. 1593, the Circuit Court of Appeals said: “The plan of composition is one agreed upon by the District and a majority of the creditors affected and that the function of the court is to determine whether or not the agreement made complies with the statutory requirements.” Finally on this point it was indicated to affected creditors in Respondent’s letter to Bondholders, which was not authorized by the Court as initially sought by Respondent, that such Bondholders had a choice or election as between the plan proposed by Petitioner and the allegedly faster paying “Plan” tendered by Respondent. This undoubtedly caused some creditors to take the view that rather than choose between two opposing plans, they would become neutral and await action by the Court before deciding which plan to sponsor. The fact that so many of the limited number of creditors seeking withdrawal of former consents did not at the same time assent to the Mozingo-Carolina proposal is strong evidence of this. The alternate proposal has undoubtedly been misleading to the creditors as it never reached the level of being a plan available for acceptance by creditors, because (1) Petitioner had not assented, (2) Petitioner did not have the legal ability to carry out and fulfill the alternate proposal, and (3) 51% of the affected creditors did not assent to the alternate proposal. On this account it was disallowed by the Court as a plan in its own right. Respondent has sought dis-allowance of a number of the consents on grounds of lack of authority or control by Petitioner. The applicable statute provides that “any creditor may act in person or by an attorney or a duly authorized agent or committee.” (Sec. 403, sub. a) Delivery of bearer bonds for exchange along with the consent of the holder is ample evidence of authority. The matter of consents is not regulated by the requirements applicable to creditor groups acting generally through an agent or committee. The control of claims by Petitioner which is disallowed by the Statute (Sec. 403, sub. d) is of that character calculated to taint the result with fraud and destroy the elements ■of fairness and equity in the plan. The Respondent has failed to establish the right to disallowance of any consents on this basis. However, if there were any disallowances it would reduce both claims and consents, with small effect on net remaining consents as the exclusion of “claims controlled by Petitioner” is what is required by the Statute. Where the Plan of Composition under consideration by the Court has been submitted by a qualified Petitioner, acting in good faith and where the consent in writing of two-thirds of the affected creditors exists, the Court then has the legal duty of determining whether the plan is fair and reasonable and non-discriminatory and whether all costs and expenses are reasonable and proper in all regards, and upon so finding it should approve the plan. See In re Willacy County Water Control and Improvement District No. 1, D.C.Tex.1940, 36 F.Supp. 36. McDonald v. Banta Carbona Irr. Dist. C.C.A.Cal.1941, 123 F.2d 968, 47 Am.Bankr.Rep.N.S. 784. Certiorari denied 62 S.Ct., 1034, 316 U.S. 668, 86 L.Ed. 1743. This protestant complains that he was not given personal notice by mail though he alleges that his status as a bondholder was well known to Petitioner. He admits in his Answer that “first notice of this proceeding was received by your Respondent by way of newspaper publicity after the filing of this action.” Respondent is undoubtedly referring to published i*eports of the filing of the Petition and the granting of Preliminary Order on August 25, 1964, which was carried in the Columbia, S. C., State and other papers on or about August 26, 1964, as shown by the record herein. This was in addition to formal publication of the Notice. From this and other evidence in the record, it is apparent that this protestant has had as much time in which to act responsively to the Petition and Order as any other Bondholder. He has failed to offer evidence of any definite or positive prejudice to his rights. He had not taken advantage of the right to register his bonds, which would have assured him the right to personal notice. The statute clearly contemplated that Notice given by publication is to apply to those not given Notice by mail. Protestant did not appear specially to question jurisdiction of this Court over him and his rights in this matter, but filed general Answer responsive to and controverting certain of the allegations of the Petition. He is properly before the Court and subject to its jurisdiction in all regards. His motion to dismiss or postpone the proceedings due to inadequacy of notice must be denied. The rights of Petitioner and of a large majority of its Bondholders could be seriously prejudiced by any failure of this Court to handle this matter with proper dispatch, subject of course to allowing protestant his day in Court, which has been duly and properly given him. Due notice of hearing was given as required by the Order of this Court dated August 25, 1964, by mailing of notice on August 28, 1964 to all known bondholders listed or referred to in the Petition of August 25, 1964, and by publication of notice once a week for three weeks in the State, at Columbia, S. C., and the Daily Bond Buyer, at New York, N. Y., commencing August 28, 1964. Affidavits on file in the record and testimony offered at the hearing commenced on October 30, 1964 at the Federal Courthouse in Green-ville, S. C., pursuant to such notice, and thereafter continued on November 7, 1964 at the Federal Courthouse in Rock Hill, S. C., amply demonstrate proper compliance with the requirements of law as to the giving of notice. No affected creditor has filed Answer opposing approval of the plan, except James P. Mozingo, III, of Darlington, S. C., the holder of 71 Bonds. Though he stated in his Answer that he was appearing only in his own behalf, he announced at the hearing tnat lie represented a number of persons whom he named in the record, holding according to his calculations some 400 bonds, or about 10% of the total bonds outstanding. Protestant complains of certain departures from the law, covenants and agreements, of the Authority, by its personnel and management. While this court allowed full explanation and cross-examination, there is neither plan nor permission in Chapter 9 of the Bankruptcy Act for the determination of this issue in a debt composition proceeding. Its bearing on the question of approval ■of the plan has been fully considered by this Authority in accordance with the Court’s duties and responsibilities as detailed in 11 U.S.C.A. 403. Other complaints by protestant fail to raise proper issues here, ignore the evidence in the record. Significant was a statement in protestant’s brief that “Respondent filed a timely answer to the petition and despite inadequate preparation time is before the court by right, not by grace.” Protestant, according to Carolina’s investment bankers had the matter under advisement, and was being advised long in advance of the initial hearing which was recessed to give full time for cross-examination and presentation. Protestant seeks to have this ■court implant, as to certain holding of the fiscal agent and others, an interpretation that their action was not in “good faith”. Cited to the court is American United Mutual Life Ins. Co. v. Avon Park, 311 U.S. 138, 61 S.Ct. 157, 87 L.Ed. 91, 136 A.L.R. 860. In that case the stated charge for handling by the fiscal agent was much less if the bondholder should sell to the fiscal agent accrued interest coupons at a third of their face value. No analogous or similar practice exists in the record before this Court. The record discloses no practice in fact, or in contemplation, not in “good faith”. Uncontroverted is the fact that those accused by protestant will be affected exactly as protestant insofar as surrender of present and issuance of new bonds are concerned. Certain fees, necessary and usual, will accrue, and these are treated hereinafter. This Court finds no failure of disclosure in connection therewith. Protestant complains that, under the reasoning of Fano v. Newport Heights Irrigation District, et al. the plan of composition should be denied because Petitioner did not raise the gas rates. This court was impressed with the testimony that the Authority could not compete, could not keep its customers, if the rates were raised. Carolina Pipeline Company, ever in the shadows, appearing openly at Rock Hill, did not offer any solution for attraction of new customers or retention of old under Carolina Pipeline rates or control of the Authority. This Court takes judicial notice of the effort of South Carolina public official and . private business to attract new industry and the place of authorities such as Petitioner in the industry hunting spectrum. Not material to this issue was the inevitable question raised in the court’s thinking of the ehanelling of future new business — would it be tied in with, or sent to, Carolina, if Carolina had control of the authority, or to the Authority. Might not the position of the bondholders become precarious because of loss of business under higher rates, inability to expand under the higher rates, the new control? Therefore the case of Fano v. Newport Heights Irr. Dist., 9 Cir., 114 F.2d 563, cannot be relied on for guidance here; the facts, the climate of operation by the Authority, the fact of competition, are different. This court is mindful, too, that the reasoning of the court in Fano, supra, was predicated: “In view of the small amount of deficiency in tax payments * * * ”; there is no factual analogy to the deficiency here. Other than a modification of the Plan of Composition insofar as the fees, etc. to be paid are to be reduced, this court finds: (1) It is fair, equitable, and for the best interests of the creditors and does not discriminate unfairly in favor of any creditor or class of creditors; (2) Complies with the provisions of this chapter; (3) Has been accepted and approved as required by the provisions of subdivision (d) of this section; (4) All amounts to be paid by the petitioner for services or expenses incident to the composition have been fully disclosed and are reasonable; (5) The offer of the plan and its acceptance are in good faith; and (6) The petitioner is authorized by law to take all action necessary to be taken by it to carry out the plan. Paragraph 6 of the original Petition reads as follows: “6. That allowances for refunding and improvement costs, as fixed without reference to necessity for this legal proceeding, which are hereby averred to be reasonable and necessary and which are payable solely by Petitioner without payment of any cost by any creditor or other person or agency, have been fixed and agreed upon, as follows: Extensions and Improvements (3 years) $380,000 Fee to Investment Bankers 2Vz% on $3,778,000 Refunding Bonds 94,450 2% % on $522,000 Improvement Bonds 13,050 Legal costs and expenses, including bond counsel 25,000 Exchange Agent 10,000 Printing new bonds 2,000 Administrative and miscellaneous costs 2,500 Total $527,000" The Court finds these costs and fees need adjustment and approves: Extensions and Improvements (3 years) $380,000 Fee to Investment Bankers 1%% on $3,778,000 Refunding Bonds 56,670 1% % on $522,000 Improvement Bonds 7,830 Legal costs and expenses, including bond counsel 17,500 Exchange Agent 7,500 Printing new bonds 2,000 Administrative and miscellaneous costs 2,000 Total $473,500 Counsel for Petitioner have, to the knowledge of the court, performed other services, and the adjustment hereinabove does not include proper fees therefor, which this court will pass on at a later date. The Plan of Composition is hereby approved as of this date, subject to the taking of proper action by Petitioner as-hereinafter required. Petitioner is hereby authorized and directed to forthwith proceed with implementation and carrying out of the Plan of Composition approved by this Order through immediate adoption of the Supplemental Resolution and immediate deposit with the fiscal agent for delivery pursuant to and subject to the requirements of the Resolution and Supplement Resolution of the Bonds of Series A and B and any interest now due thereon, together with the necessary Certificates of Indebtedness; whereupon the fiscal agent shall forthwith proceed with implementation of the plan of exchange and delivery defined in the Resolutions, all of which shall be accomplished within not exceeding 15 days after this Order shall become finally binding and effective. Upon implementation of the Plan of Composition approved hereby through deposit by Petitioner with Citizens and Southern National Bank of South Carolina, at Columbia, S. C., as fiscal agent and as exchange agent, of all required Refunding and Improvement Bonds of Series A and B, all interest due thereon and all Certificates of Indebtedness necessary to provide for delivery of all Bonds of Series B and exchange of all Bonds of Series A in accordance with the Plan of Composition for all Outstanding Bonds and Coupons, whether deposited or not, and upon implementation of the plan of delivery and exchange, except as to bonds not yet deposited, then and thereupon the Outstanding Bonds shall be fully extinguished and shall no longer constitute an indebtedness due by Petitioner or any impediment to full validity of the Refunding and Improvement Bonds now being issued; provided that any still undeposited Outstanding Bonds and Coupons shall nevertheless be and continue acceptable for purposes of refunding exchange only, during the additional time allowed therefor under the provisions of paragraph (6) of this Order. Bondholders who have not yet deposited their Outstanding Bonds and Coupons for refunding exchange shall be allowed until two years following the effective and binding date of final decree of approval of the Plan of Composition pursuant to subparagraph f of Section 403, Title 11, U.S.Code, or until the March 1, 1967 regular interest payment date, whichever shall last occur, within which to deposit such Outstanding Bonds and Coupons with the Citizens and Southern National Bank of South Carolina, at Columbia, S. C., as fiscal agent and as exchange agent for refunding exchange pursuant to the approved Plan of Composition, provided that after such latter date all liability of Petitioner under any undeposited Outstanding Bonds and/or Coupons and under any undelivered refunding Bonds and/or Certificates of Indebtedness deposited with the fiscal agent for purposes of refunding exchange shall stand fully extinguished because of the nondeposit of such Outstanding Bonds and Coupons within the time allowed by this Court; and that any such extinguished Refunding Bonds and/or Certificates of Indebtedness held by the Fiscal Agent shall be voided and delivered to Petitioner, all consistently with provisions to this effect contained in the Notice of Hearing pursuant to the initial Order herein. That the payments outlined herein-above are approved, subject to modification or change on proper showing. This Court retains continuing jurisdiction of this proceeding and of all persons subject to the jurisdiction of the Court herein pending and until all Outstanding Bonds have been exchanged or all rights under any Outstanding Bonds have been fully and finally extinguished for all purposes, including validity solely for exchange for Refunding Bonds and Certificates of Indebtedness. Any person having proper interest may Petition this Court at any time on reasonable notice for any necessary and proper relief incident to implementation and carrying out of the Plan of Composition approved hereby; provided, however, that this provision of this Order shall not be construed to include the resurrection and restoration of any rights already finally extinguished by the provisions of this Order. A final decree shall be issued herein following implementation of the Plan of Composition approved hereby. And it is so ordered. APPENDIX III PETITION FOR APPROVAL OF PLAN OF COMPOSITION TO THE HONORABLE COURT AFORESAID: Now comes the Petitioner, York County Natural Gas Authority, by and through its undersigned counsel, and respectfully shows : 1. That Petitioner is a body politic charged with providing natural gas service to the general public of York County, South Carolina, having been created by Legislative Act No. 959 of the Acts of South Carolina for 1954; and that Petitioner is an agency or instrumentality of the type and character defined and described in Title 11, Section 401, United States Code. 2. That pursuant to due legal authority Petitioner has now outstanding Revenue Bonds and interest thereon payable solely from the revenues of its natural gas system, heretofore issued to finance construction, completion and extension of said system, as follows: (a) $2,762,000 of Natural Gas System Revenue Bonds, dated September 1, 1957, bearing interest at six separate rates, and varying from 5% to 5.80%, which has not been paid since the interest payment date of March 1, 1961, and is due from such date at the respective rates borne by such bonds. (b) $450,000 of Natural Gas System Revenue Bonds, dated September 1, 1958, bearing interest at six separate rates, and varying from 5% to 5.80%, which has not been paid since the interest payment date of March 1, 1961, and is due from such date at the respective rates borne by such bonds. (c) $422,000 of Natural Gas System Revenue Bonds, dated July 1, 1959, bearing interest at six separate rates, and varying from 5% to 5.80%, which has not been paid since the interest payment, date of March 1, 1961, and is due from-such date at the respective rates borne by such bonds. (d) $144,000 of Natural Gas System. Revenue Bonds, dated October 1, 1960, bearing interest at 6%, which has not been paid since the interest payment date of September 1, 1962, and is due-from such date at the rate borne by such bonds. (e) $95,758 for moneys advanced to> Petitioner by certain of those who purchased the Outstanding Bonds, used by Petitioner along with its own moneys-available therefor to meet the March 1, 1961 coupons on the Outstanding Bonds described in subparagraphs (a), (b) and' (c) above. 3. That Petitioner encountered a number of unforeseen difficulties in-, creating and establishing its gas system, including particularly (a) unavoidable-delay in financing with resultant loss of' one year’s anticipated heating season revenues, (b) unanticipated additional construction costs, and (c) exhaustion of maximum allowable capitalized interest funds before generation of sufficient, earnings to meet interest cost out of current revenues available after payment of operating costs; and that as a result thereof Petitioner is in default under the terms of its Bond Resolution and Supplements and the requisite number of bondholders have declared all Outstanding Bonds forthwith due and payable pursuant to the requirements of said Resolution and Supplements. 4. That the revenues pledged for payment of the Outstanding Bonds described above are inadequate to pay said Bonds and the interest thereon as the same mar ture, after first providing for necessary operating costs; that because of its default Petitioner is unable to obtain necessary funds with which to meet an ever increasing present demand for gas service, particularly in newly established outlying residential developments seeking gas service for central heating, hot water heating and cooking requirements; and that a long period of restricted growth -and continued default, with serious limitation upon its ability to properly serve the public and to meet its obligations to its bondholders, will ensue unless Petitioner obtains approval for composition ■with its creditors as hereinafter outlined and sought. 5. That according to realistic revenue projections based upon past actual •operating experience, with allowance for reasonable future growth as estimated therefrom, your Petitioner has now developed sufficient revenue producing potential (a) to meet current interest cost -at a realistic current interest rate on the ^Refunding and Improvement Bonds proposed to be issued to cover the costs and expenses of the refunding and improvement program; (b) to retire the refunding and improvement bonds within a 30 year period; and (c) to provide for eventual payment of all interest now outstanding and unpaid, without interest thereon, within approximately the same retirement period. 6. That allowances for refunding and improvement costs, as fixed without reference to necessity for this legal proceeding, which are hereby averred to be reasonable and necessary and which are payable solely by Petitioner without payment