CONVERSIONS.

Auckland Star, Volume LXIV, Issue 283, 30 November 1933, Page 16

CONVERSIONS.

£10,500,000 TO DATE. LOCAL BODY SECURITIES. NO FLIGHT OF CAPITAL. (By Telegraph.—Parliamentary Reporter.) WELLINGTON, this day. New Zealand local authorities have already secured approval from the Local Bodies' Loans Board for conversion operations involving £10,500,000. This fact was stated by the Rt. Hon. J. G. Coates, Minister of Finance, in moving the second reading of the Local Authorities Interest Reduction and Loans Conversion Amendment Bill in the House yesterday afternoon.

Mr. Coates intimated that approval to-day of applications representating £3,500,000 had brought the total up from the £7,000,000 at which it had stood. Replying to questions, the Minister said it was impracticable for all conversions to be undertaken by 1935. It would be necessary to renew the legislation for the imposition of the 20 per cent interest reduction. It was a matter for gratification that one New Zealand local authority had recently raised a large sum of money in London at 3J per cent at 97. Never before in the past 30 years had such favourable terms been available. Mr. A. J. Stall worthy (Independent, Eden): The cost of meeting our oversea obligations has never been higher, cither. Purposes of Bill. The measure, the Minister explained, would stabilise local body interest at per cent, and the amending bill had been asked fdr by the local authorities themselves, primary to make the position clear in relation to the overseas, investor. The reduction in interest applied only to securities held by New Zealand nationals. The first Act was passed on March 9, 1932, and the 20 per cent interest reduction came into force on April 1 of that year. Some securities had an optional place of payment of interest, and although the last payment prior to /January 1, 1933, had been in New Zealand, they had actually been disposed of to oversea buyers prior to the passing of the Act, and the buyers believed 'that they bore the rate of interest stated on the bonds. Speculation Problem. Mr. F. Langstone (Labour, WaimarinQ): Can the Minister find out the amount of debentures sent overseas?

The Minister replied that the question evidently related to the possibility of people sending debentures overseas for the purpose of profiting on exchange. "I have not been able to find one instance," he continued. "No doubt there are some, but it has not been wholesale, but it is impossible to find out. If some speculation did take place I do not know how we could avoid it, but this is definitely to prevent a flight of this kind in the future." When it was discovered that it was possible to speculate in these securities, the London Stock Exchange, said Mr. Coates, was approached to give an undertaking that it would deal in no securities after April last, and no sales had been made. The banks and everyone it was possible to get into touch with on the matter had also been approached;' and the request had been complied with. The primary object of the bill was not to safeguard the New Zealand national, but to enable the New Zealand authorities to keep faith with overseas buyers, and thus preserve their credit on the

London market. That was essential to get satisfactory terms for the renewal of maturing loans.

' The legislation also included points which had resulted from experience of the original Act, and it would enable local authorities to get' the maximum benefit from loan conversion. Separate rating areas in counties could be consolidated for conversion purposes, but that was not compulsory. The bill also gave the right to take over debts from another local authority, such as in the case of an electric power board which took over a reticulation system and would then take over the local body debt in respect to- it.