Texas v. Tabasco Consol. Independent School Dist.

HOLMES, Circuit Judge.

Reconstruction Finance Corporation appears in the record as the outright owner by purchase prior to June, 1940, of ninety-two percent of the bonds of Tabasco Consolidated Independent School District, and as such owner accepted the offer of composition. The State of Texas owns the remaining bonds and refused acceptance. The decree finds that all bondholders are of one class, and is based on the acceptance *197 of Reconstruction Finance Corporation. It also finds that the plan it approves does not discriminate unfairly in favor of any creditor, but we think it clearly does. The State is to get sixty-five percent of the face of its bonds (as bonds not purchased by R. F. C.) in cash. Reconstruction Finance Corporation is to get “the money expended by it for the purchase of old bonds of petitioner as herein provided with interest on all disbursements for such purposes at 4% per annum from date thereof .” It is not to deposit its bonds with the disbursing agent, but is to be paid with the new 4% bonds to be issued. It is plainly getting new 4% bonds for its investment, with interest added, in exchange for the old bonds it owns, bought at 65 over three years ago. The State is to get 65, without interest, and in cash, though it considers new 4% bonds more desirable. Reconstruction Finance Corporation is not an outside lender of money, or purchaser of new bonds, but is the majority bondholdex-, controlling the fate of this composition. It is entitled to nothing more than or different from what the minority receives. The argument that it will not make a loan unless for the entire bond issue, because it will refuse to be a co-creditor, does not carry weight. It is a co-creditor now.

Rehearing denied.