Moldavian Railways, Life and labours of Mr. Brassey (1874), Helps, Arthur, Sir, Galatz Roman

Posted on September 14th, 2009 by admin and filed under Railway

Sir Arthur Helps, Life and labours of Mr. Brassey, Boston: Roberts Brothers, 1874

marginalia omitted or between {} when informative

[p. 258]

(A.D. 1858-64.)

Every railway, or group of railways, the construction of which has been mentioned in this work, has been intended to illustrate some special circumstance of railway formation. The Moldavian Railways are now brought forward in order to show the difficulties of negotiation which often precede the construction of railways or any other public works.

In December 1858, M. Adolphe de Herz, then of Frankfort, addressed Mr. Netlam Giles a letter, proposing the formation (through Mr. Brassey), of a company for constructing a railway from the Austrian Carl-Ludwig Rail way, at Lemberg, in Galicia, to Czernowitz

[p. 259]

and the Bukowina frontier of Austria ; and thence, through Moldavia, by Roman to Galatz on the Lower Danube, with branches to Jassy (the capital), and to the salt mines of Okna.

This railway was to be upwards of 500 miles long, and roughly estimated would cost about 6,5oo,ooo l.

In the reply to M. Adolphe de Herz, delay was suggested on the ground that, in the face of the Emperors speech to the Austrian mbassador on the 1st instant, it was utterly impossible to hope that capitalists would at that moment entertain the question of constructing Austrian railways.

It was urged upon M. de Herz that he should not press his project now: ” wait a few weeks : ” it was said, ” we shall either have war or peace : nothing can be worse than the present uncertainty : no one will listen to you now ; not even if you offer diamonds for chalk stones.”

If it were not a too self-evident proposition, one might dilate upon the injury to all good work effected by war, or by the fear of war.

[p. 260]

The Emperor of France, on his fete day, makes a remark, which is not supposed to be friendly, to the Austrian Ambassador, and
immediately a good work, for distant Moldavia, is set aside.

The war between France and Piedmont Austria having terminated, the railway negotiations were re-commenced ; but, as the conditions for a concession of the Moldavian section of the project had been agreed upon in favour of M. Mavrojeny of Jassy, and as no concession had then been demanded from the Austrian Government of the section from Lemberg to Czernowitz and the Bukowina frontier, it was decided that efforts should, in the first instance, be directed towards the construction of the Moldavian {July 1861} section (about 300 miles). Mr. Giles thereupon introduced the project toMessrs. McClean and Stileman, and to Mr. Brassey. Messrs. McClean and Stileman undertook the engineering, and as no surveys existed, Mr. McClean, in that enterprising and liberal spirit which all who know him must recognise, as he, too, has been one of the foremost

[p. 261]

leaders of labour in our time, offered to report upon the line. Accordingly, in September 1861, the whole line from Lemberg to Galatz
was examined by Mr. McClean ; and on November 25, Messrs. McClean and Stileman made a report, recommending the contract for the Moldavian section to be given to Mr. Brassey, Sir Morton Peto, and Mr. Betts at the sum of 2,88o,oool., or 9,6ool.
per mile.

On April 25, 1862, a concession was granted by the United Principalities of Wallachia and Moldavia to M. Mavrojeny and the Prince Leo Sapieha (chairman of the Carl-Ludwig Company), of the Moldavian portion of the above railway (300 miles), with a guarantee
of 6l. per cent, on a capital fixed at 11,584l. per mile.

There was, however, in this concession a condition which rendered it valueless. It was stipulated that the whole 300 miles should
be completed in five years. The Govern ment of the Principalities being only a year old, its credit in the markets of Europe was
not such as to make it in the least degree

[p. 262]

probable that the requisite sum could be raised. Messrs. Glyn, Mr. Brassey and others proposed that the concession should be modified by dividing the line into sections, to be executed successively ; and they offered to provide the funds, and to construct the first section from Galatz to Adjud (80 miles) upon the Government guarantee named above. But the Government refused to modify the
concession. Accordingly, the project in its entirety was laid before the public at the end of June 1862; but they were not attracted by the project, and did not subscribe the requisite capital.

Letter of Prince Sapieha having requested Mr. Brassey s opinion as to the best mode of proceeding, Mr. Brassey addressed to him the following letter :

London : July 1 8, 1862.

Prince, After full consideration of the Moldavian Railway project, it seems that we are both of opinion that there is a serious defect in it ; namely, that it has no junction with your Carl-Ludwig Railway at Lemberg ; and I fear you will have considerable difficulty in obtain
ing the support of the public to an isolated scheme for the Principality of Moldavia.

If a company could be formed for the entire line from

[p. 263]

Lemberg to Galatz, with the branches to Jassy and Okna, it would, I think, be favourably received ; and I venture , to suggest that your Highness endeavour to form a combination with Baron Anselm Rothschild and your friends at Vienna for carrying it out.

You will easily be able to form an approximate idea of the capital required; and should my co-operation as contractor be thought desirable, you may consider I will accept one-third of the contract price which may be agreed upon in shares of the company.

I shall be in Paris tomorrow night, and will make a point of conferring with Mr. Talabot on the subject.

I have the honour to be, &c.,


Baron Anselm de Rothschild and M. Talabot declined to embark in the undertaking, and nothing was done in the matter until June 1863. In that year Messrs. McClean and Stileman, again willing to facilitate the project, made definitive studies of part of the line at their own expense. After protracted negotiations at Bucharest, the promoters of the railway succeeded in making a preliminary arrangement with the Government for a new concession, with a guarantee of 7 1/4 per cent., on a capital fixed at 12,800l. per mile, instead of 6 per cent, on 11,584l/. per mile as originally granted. The line to be

[p. 264]

constructed in independent sections, and the Principalities to subscribe one-fourth of the capital. These conditions were submitted by Mr. Brassey and the other promoters of the railway to the International Financial Society, in August 1863, but they declined to co
operate in the undertaking.

Not daunted by these repeated failures or discouragements, Mr. Brassey and his friends in the winter of that same year, renewed the
negotiations at Bucharest with the hope of obtaining a definitive concession in the terms agreed upon in the preceding June. Meanwhile, however, an adversary had entered the field, the well-known Spanish banker and capitalist, the Marquis Salamanca, who,
with M. Gustave de la Hante, had offered to take the whole line, and relieve the Government from their subscription of one fourth of
the capital. The Government announced their preference of Señor Salamanca’s offer to that of Mr. Brassey, and recommended
the Chamber to accept it. Mr. Giles then said to the reigning Prince Couza, ‘Let Salamanca and De la Hante have the con

[p. 265]

cession. I return to England, and wish your Highness good morning.’ The Prince, however, would not hear of this abrupt departure. What the Prince desired was a fusion between Salamanca s party and Mr. Brassey s. Eventually this was effected ; and a concession granted for the whole line to Salamanca, De la Hante, Mavrojeny, Sapieha, Peto, Brassey, and Betts, upon terms which Mr. Brassey and his friends informed the Government at the time would prove unacceptable to the public.

Then there was a meeting between Mr. Brassey and Salamanca in London. The terms of the concession were, that the concessionaires might issue three fourths of the capital (about 4,ooo,oool.) in bonds, Salamanca’s view being that the line could be made entirely with the proceeds of the bonds, and the shares (whatever they were worth) would be the contractors profit.

The Marquis proposed to issue the bonds at once rand Mr. Brassey said, Mr. Salamanca, before we can issue bonds, the shares

[p. 266]

must be paid up : and I am not prepared to say that we can get these shares placed.

Several schemes were suggested and discussed for getting over this difficulty, none of which however were satisfactory to Mr. Brassey, who, with his characteristic scrupulousness, declined to assent to any course, except that of a bond fide sale of the shares,
or an advance upon them to the extent of the value they represented.

He therefore said to the Marquis, ‘Look here, Mr. Salamanca, if you and your friends will put 500,000l. down on the table any day you like to name, I and my friends will do so too : then the shares will be paid up,’ and there can be no possible objection to the
bonds being issued.

The view taken by the British contractor on this occasion is one which will certainly recommend itself to the public; and it affords
a striking instance of the extreme sensitiveness of Mr. Brassey in those dealings in which the public were concerned. There were further negotiations between Mr. Brassey and Salamanca, but they came to

[p. 267]

nothing. Ultimately, the Marquis obtained another concession on his own account from the Government of the Principalities ; but he
was again unable to carry it out.

Mr. de Herz, the original proposer of the railway, again appears upon the scene. He had settled at Bucharest as the manager of the Roumanian Bank, and had discussed the question of the railway with Prince Couza, who was greatly discouraged on account of
the Marquis s efforts having failed. The Prince asked if Mr. Brassey would recommence negotiations a question which was conveyed to the English promoters of the railway.

Meanwhile, the line from Lemberg to Czernowitz had been constructed, and Mr. Brassey was upon the point of completing the line from Czernowitz to the Moldavian frontier at Suczawa, on behalf of the Lemberg and Czernowitz Company. It was thought desirable that the concession should be demanded by this Company. The Chevalier d’Ofenheim therefore proceeded to Bucharest, and on June 7, 1868, a concession was

[p. 268]

granted to Mr. Brassey and others, nominees of the company, for that part of the original project which extended from the Austrian
frontier to Roman, with branches to Jassy and Botoschani, under the terms of 7 1/2 per cent, upon 14,000l. per mile, with a subvention (as fonds perdus) of 2,5ool. per mile in addition, terms nearly twice as onerous to the Government as those asked on the previous occasion. Mr. Brassey was employed as contractor for the Moldavian lines comprised in the concession to the Lemberg and Czernowitz Company ; and a portion of these lines, namely, those from Roman and Jassy were completed and opened in 1870, in Mr. Brassey’s lifetime.

Thus Mr. Brassey, after negotiations extending over ten years, completed only 360 out of the 500 miles of which the original
project, mooted in 1858, consisted. The remaining 140 miles between Roman and Galatz were conceded to Dr. Strousberg in
1868, no part of which has yet been opened.

The story of this contract affords a notable instance of the quantity of work, in the way of

[p. 269]

negotiation, that Mr. Brassey and other great contractors have had to undertake before the commencement of their labours of construction.

Posted on Monday, September 14th, 2009 at 4:45 PM and is filed under Railway. RSS 2.0 feed.