Article from the Archives: ‘Olympic, Titanic & Britannic: An Issue of Finance’
It’s widely believed that construction of the three ‘Olympic‘ class ships was made possible by the use of American money – resources from either J. P. Morgan or IMM. The truth is the opposite: White Star was not supported by IMM’s resources. IMM was supported by White Star. Construction was financed through capital raised in the United Kingdom. This article (external link) explains in detail how:
- White Star financed the ‘Olympic’ class ships and others by borrowing the money from largely United Kingdom-based investors, mortgaging its own fleet;
- White Star borrowed the money, rather than IMM, to take advantage of its stronger financial position and lower borrowing costs;
- The new ships provided additional security underlying IMM’s own debt, without increasing the money IMM itself borrowed;
- Dividends paid by White Star from 1908 to 1912 helped IMM meet its debt interest payments.
It was first published in the Titanic International Society’s Voyage July 2020: Pages 135-39.
The subject of how the construction of the ‘Olympic‘ class ships was financed is a good case study showing the necessity of using primary sources (original documentation) rather than secondary sources (such as books or television programmes). We have the prospectus which was issued to investors in 1908, in which the White Star Line explicitly stated why they were borrowing the money; we have the IMM annual report from the same year, which carried a statement on behalf of President J. Bruce Ismay and the Board of Directors, explaining that the White Star Line was borrowing the money and giving their reasoning for doing so; and we have records from both the financial press and the London Stock Exchange Daily Official Lists (SEDOL) confirming that the bonds were issued and the prices they traded at when they changed hands on the market. In contrast to this, many modern books or television programmes have simply claimed that J. P. Morgan or IMM’s capital resources were made available to finance construction: this inaccurate assumption is simply false.
Above: ‘Movements in Shipping Securities’ reported on 18 June 1914. They were listed in alphabetical order by the name of the shipping line, so the many rows after ‘Cunard’ and up to ‘O’ have been deleted; ‘Oceanic Steam. Nav.’ is an abbreviation for the Oceanic Steam Navigation Company, which was the legal name of the White Star Line. ‘Deb’ denotes that the security being traded was a debenture bond rather than a stock. (Shipbuilding & Shipping Record, 1914/Author’s collection)