Unfair Distribution Of Hotel Loans Alleged

Press, Volume CIII, Issue 30487, 8 July 1964, Page 1

Unfair Distribution Of Hotel Loans Alleged

(New Zealand Press Association)

WELLINGTON, July 7. New Zealand Breweries, Ltd., feels it has not received from the Government financial assistance to expand hotel accommodation that is its due.

The chairman of directors, Mr M. O. Barnett, says in a review printed with the annual accounts published today that, although the Minister of Tourisfh (Mr Eyre) in a recent address to the Travel and Holidays Association, paid a tribute to the endeavours of private enterprise in providing increased hotel accommodation, New Zealand Breweries does not think that it has received the Government financial aid, in the form of loans, which, it considers, it was reasonably entitled to expect under the Government-announced "loans-and-guarantee scheme.” “In October, 1962 the Government, in a circular, announced such a scheme to encourage the provision of additional hotel accommodation in New Zealand,” says Mr Barnett. “The scheme, as announced, provides for loans, at current rates of interest, for up to 50 per cent of the total cost of approved tentures.

“Alternatively, the scheme provides, in approved cases, for Government guarantees of loans of up to 40 per cent of the total costs of any project, provided the equity in any such project is not less than 25 per cent of the total cost 30 Per Cent Offer “In good faith, and acting on the limited assurances of these terms which are open to anyone to apply for, our company applied for a loan of 50 per cent of the total cost of our new tourist hotel in Queen street Auckland, where demolition of the old hotel is now almost com-

pleted, and architects’ working drawings are well on the way to the point of calling for tenders. “In response, we were granted a loan of approximately 30 per cent of the estimated cost.

“Subsequently, after our plans were well on the way, and our commitments made, we were informed that the Government had either changed the terms of its original scheme announced in October, 1962, or had made new arrangements to give very considerable Government support on different terms to the building of another tourist hotel in the near vicinity. “In this case, however, we understand that the equity capital to the . proposed company to float this hotel, which equity capital is sponsored by a company not domiciled in New Zealand, is about 12 per cent of the total cost, compared w’ith the minimum of 25 per cent stipulated in the Government-announced scheme in,October, 1962. “We understand also that the Government guarantee and advances in this venture are not the 40 per cent offered to others, but, in fact, cover all the remaining 88 per cent of loan capital and loan capital and capital commitments. “Gilt-edged Guarantee” “We consider this principle is not a fair one, and that any venture which requires a Government guarantee of 88 per cent of the total cost in order to attract investors in non-equity capital, is not, in

fact, private enterprise at all, but simply a disguise. “It also appears to us that if the very favourable Government support reported to be extended in this isolated case is necessary to induce investors to advance money, there is, inferentially, a very strong reason to suppose that the prospective investors approached were not willing to advance money on the financial prospects of the hotel alone, but would do so only on a gilt-edged guarantee by the Government.”

N.Z. Breweries' accounts, which show a net profit of £1,202,568, appear on Page 21.