LOAN CONVERSION.

Auckland Star, Volume LXIV, Issue 238, 9 October 1933, Page 3

LOAN CONVERSION.

FURTHER OPERATIONS

£20,000,000 IN THREE YEARS

RECENT MARKET SUCCESS

(By Telegraph.—Parliamentary Hoporter.) WELLINGTON, this day. Further loan conversion operations on the London market, involving £20,000.000 of the Dominion's debt, arc possible during the next three years. Last week £5,000.000 was converted from an interest rate of 5 per cent to per cent, and arrangements are to bo made at the earliest favourable opportunity to deal with an amount of approximately £4,000,000 outstanding on tho London market, on which the optional maturity date accrued early this year. The interest rate on this loan, however; is 4 per cent, and it docs not offer scope for substantial saving. Within the next three years tho Dominion will have

optional rights in respect to further loans totalling £10,000,000, which arc now outstanding on the London market.

Discussing the success of the £5,000,000 conversion operation, the lit. Hon. J. G. Coates, Minister of Finance, said that the loan was really a cash and redemption loan for the purpose of replacing tho £5,000,000 1032-34 5 per cent bonds which were to be paid off by giving the prescribed three months' notice with £5,000,000 1020-54 3 J per cent stock. The issue, juice was £97 per cent. Tho loan was underwritten on Monday and Tuesday last, advertised on Wednesday, and subscription lists closed on Thursday a-fter remaining open for 35 minutes.

The return to investors, with redemption at par at final maturity date, is £3 14/3 per cent, added tho Minister, and the cost to the Government, including redemption, is approximately £3 17/fi per cent. Subscriptions were seven times the amount of securities to bo paid off.

Mr. Coates recalled that in thfi case of the 1932 New Zealand loan, 47 per cent was loft with the underwriters, and in 1931 a similar position arose when the underwriters had to tako 08 per cent.

The saving brought about by the reduction of interest from a basis of 5 per cent to 3} per cent amounted to approximately £07,000 per annum, taking into consideration the redemption costs of tho respective loans.

"The Dominion is to be congratulated on the result, which is the most favourable over the past .30 years," said Mr. Coates, who added that the relief that would accrue to the taxpayer was welcome, though admittedly small in relation to the total burden of overseas debt.