THE FIVE MILLION LOAN

Press, Volume LXVI, Issue 13906, 3 December 1910, Page 10

THE FIVE MILLION LOAN

_ * DISCUSSION IN THE HOUSE. .STATEMENT MINISTER. OF FINANCE. (SPTXIAI. TO "THB rEKSS.") WELLINGTON, December 2. In the di-'cutt-ion on tho Public Works Statement in the House t<v-day, tho five million loan recently raised bulked largf?. Referring to the non- j (success of the "loan, Mr Massey paid h< , did not want to make political capital out of it, but it was tho most ficrioiis rebuff the country- had ever received. Sir Joseph Ward: That i<, not the opinion in England. Mr Ma&sey: Well, our 3J per cents, are only !)(;, while the Tasinanian >1\ per cents, are .standing at W, noiimn-.-tanding tho fact that in our case half a Year's interest was due next month. J The position, however, was only to be expected, under tho drcunwtances, 1.0----causo £5.000.000 was far too much to borrow at one time. In the words of the Into John Ballance. 'What had happened in connection with that io«r> was enough to make sane men pauw." The Prime Minister said there was no occasion U) talk of having "warned the Government."' The country had every reason to be proud of the result oi tho flotation of that loan. The Bank of England rate of discount at that time was o per cent., and. according to a cablegram he. had received that morning, it was now lj per cent. It was I highly satisfactory that when the Bank I of England rate was o per cent., this country, with some of the strongest and tx-.tt financial men in London, floated its "j millions loan at 3J per cent., and it wa*> taken up at £i>B 10s, though he knew that one newspaper writer stated that it was put on the market at £SH'J. A member of Parliament had called on him to ask him whether it was true that tho Bank of New Zealand had underwritten the loan. That «ilv> was absolutely untrue. The Bank <>f Now Zealand was never iisked to underwrite, the loan, and if it hnd taken any portion of it. that was not done at his .suggestion, and it could not have been more than £100,000. If Mc Bank of New Zealand had wnnt<?<! to underwrite trie 5 million loan, ho would not have been agreeable to it. The Bank of Now Zealand was a strong bank, ar.d was doing very well, but lie would be sorry to see it underwrite a lo:m of 5 million. The flotation of; tho loan in London on (he terms he had mentioned was a most gratifying proof of tho esteem in which New Zealand was held by London financiers. He doubte<l whether any other country would have done better, or as well. Mr Massey: Don't forget the two per cent, for conversion. Sir Joseph Ward said ho had taken that into account. Those who had taken up the loan in the Old Country were not making any losses on it in letting it out to their clients, and he believed that they and their clients would do very well out of it. Furthermore, for this country to have its finances all fixed twelve month, l * ahead was a very fine thing indeed. His answer to those who said that five million was too much to raise was that it had been underwritten at £98 10s at 31 per cent. Before putting the loan on the market he had consulted two or three very experienced financial men at Home. He was advised that if they put only a two-million loan on the market the results would not have been nearly so satisfactory. When vi Home he talked of a tour million loan, and he was assured by financial men, with a lifetime of financial operations, that it would be better to have a loan of that amount than of lialf the sum. If a local "body wanted a loan from Home for £100,000 it could get it at terms than if the amount was only £50,000. When it. was a large loan and several la financial houses were 'interested, their power made for success. That was what had occurred in connection with this particular loan. Tho loan was the largest New Zealand had floated. It contained £1,250,000 for the building of the Dreadnought. We could have done with £375,000 If provision did not require to be made for .tho vessel. He would not discuss on. that occasion the value of our having taken our share in the naval Jofence of the Empire.- To give a comparison of the Tasmanian 3£ per cent, stock with our own stock was not on all fours, with our five million loan. Tasmania had not been on the moiwy market for a big loan for many years. Mr Herries said that h<? would not bo prepared to discuss the flotation of tho five million loan until the English newsgJapere were to hand reporting at. Meantime he would mention that a larger proportion of the loan had been, taken up 'by the underwriters than had been tn© case with any previous Now Zealand loan, but thero might bo an explanation of this. Our ordinary stock was. down to £96, and that was tho "worst aspect of the transaction, because the stock of New South! Wales and other countries had not fallen. Wo had floated £6,8.50.000 in one year. He would very much lilte to know the cost of floating all the loans, and lie thought details ehtould bo laid before Parliament as was done up to the year 1903.