The Dominion. TUESDAY, DECEMBER 27,1910. THE LAST BIG LOAN.

Dominion, Volume 4, Issue 1009, 27 December 1910, Page 4

The Dominion. TUESDAY, DECEMBER 27,1910. THE LAST BIG LOAN.

We noted last week, on the testimony of the City articles in several of the leading British journals, including the Times, the Financial Times, the Morning Post, and oth•ors, "that the news of an impending New Zealand loan of £5,000,000 had ; weakened the market in securities. A. - Christchurch contemporary is very i indignant with us for having referred in this way to a loan that -the Prime Minister declared had hcen a "complete success" (Hansard, vol. 153, page 594), and says a great many strange things that must mystify its i readers. As a matter of course, it 9 says—and a simple reference to our '• brief note will show that it is here saying what is not correct—that we declared that "the country is going to the dogs." All we were concerned to do was to show that the-raising of the big loan was an unfortunate _ business, and that the Prime Ministee, who prides himself upon his astuteness, chose almost the worst possible time for floating a loan greater than any within the memory _ of most of us. The London pipers for the week following the issue of ■ the prospectus arrived last night, and they fully bear. out our argument upon this point,' and our contention that the loan was really a failure. The Financial Times, for example, said in its City article on November 18, six days after the publication of the prospectus: "The New Zealand loan issue has been a fiasco, 03 per cent of the total being loft with the underwriters. The scrip ■ has fallen to l—\ discount." It adds that the terms were "unusually generous"—a point worth bearing in mind. Eeferring to the matter cditorially on tho same day, under the heading "New Zealand Fiasco," this important paper has some observations which make an interesting commentary upon the Prime Minister's account of this splondidly "successful" loan and also upon his claim, [, and the claim of his friends, that he

is a wonderfully-good'custodian of our finances: i. We understand that the underwriters of the Now Zealand thrco and a half per cent .£5,000,000 loan have been left with »3 pefcont of the total. The terms of lssue were, so favourable that this very .Poor result lias greatly surnrised the _ btoefc. Exchange. Of course, tho issuo !, ?? m,! at an unfortunate time, tho com-oil-.ation of political fog and 5 rcr cent 1. s<-jyrcely being conducive tc freedom of 'purchase on the part of tho investing public. There had, of course, been nlcntv of comment by other papers before that date (which was two days after the date fixed for the closing of applica- » tions). The Times, for cxamnlc, mentioned on November 17 that the Old New Zealand 3\ per cents had declined 1 "owing to the poor response t to the now issue on the part of tho 0 Kublic." The Manchester Guardian of the same date referred to "reports that the now issue was not going off ° well," and added: "Certainly New L Z.<aland was unfortunate in the time ' chosen for raising a loan of £5,000,000." The Westminster Gai- , ctte of November 1 18 had a note headed "Not a Public Success," which stresses three points: (1) The folly of going on the market at such a ,s time for such a loanj (2) the extremely favourable terms offered (and obviously the greater the bargain offered "to the" investor, the worse for the' New Zealand public); - and (3) tho fact that other issues did very well.' This last point is a direct g rebuttal of the assertion of our Christehurch contemporary that "precisely the same thing would have happened [as happened to our issue] if the demand for money had been made from any other direction." After some general remarks, the Gazette said in the note'referred to: Sevoral offers of capital have been made tms week, and the prospect is that there will be a good many more before long, iov the most part recent appeals have met with a ready resDonsc. Not so, however, in tho case of the New Zealand 3i per cent debentures offered at 061. It now transpires that the underwriters have had to take something like 03 per cent. This ;.' is not because the terms were regarded as unfavourable, but probably it is in part, at all events, owing to tho indisposition of tho public to apply largely for bonds which are redeemable at tho end of four years. Again, it has to he borne ■ ni mind that much of the underwriting was done with a view to retaining the stock as an investment. Then, too, tho political situation at Home niay havs had something to do with tho smallncss of the. applications sent in. At all events, the result in this particular instance, is s not likely to deter other would-be bors rowers. s .It occurs to us that the statements of the Guardian and the Gazette, papers greatly esteemed and relied on by the Ministerialist press in New Zealand, should 'be supplemented by an extract from the baihj Sews, which is even more to the taste' of those for, whom tho Christehurch . paper' speaks. The Xews of November 18 declares that "the reception , accorded to the New Zealand loan of £5,000,000, in four-year Convertible Three and a Half Per Cent Deben- • hires was chilling, it being understood that the underwriters are saddled with about 93 per cent of the total." Saddled ! In its City article i on that- day the Morning Fost ; referred to '/-the. poor reception given . to the New Zealand loan," and the Times, in the "Stock Exchange" article in its Financial Supplement, said: "This issue came at a most i unfortunate moment, and it Was therefore no, surprise to the-market '. to hear that 'underwriters were saddled with; 92 per cent or so of the amount .offered,' although the, terms • of'the issue were regarded as decidedly attractive." Our purpose in directing attention ,to this matter is ' to enable, those -of the public who do not follow the Government's finant cial transactions at all closely to ;- judge for themselves how little" relic anco can be placed on tho.judgment " of the Pkimb Minister where his .; own financial, achievements aro conj corned. In his references in Parliii- ■ ment on November 11 and 15 to the flotation of this five-' million loan r Sir Joseph Wakd repeatedly took - credit for this "successful" transac- [ tion—he harped on this aspect of the 6 matter again and again. Wo have 1 seen what tho London press thought r of. the transaction ancf the ,wisdom of it. Sir Joseph Ward said on November 11 (Hansard, vol. 153, page 5G2) that ho "authorised the terms,, conditions, .discounts,, rate of interc est, and everything connected with a the loan." His,, then, was the rc- ;, sponsibility for the generous terms '. offered tho London money-lenders to 0 induce them to take up the loan. But the thing that will most interest the taxpayer here is the fact that the I, Prime Minister has arranged for him to pay his share.of an abnormally high price for tho liso of an ab- ; normally large sum of money borrowed very largely for election purposes. But that, is not all; for this big, unwise loan may operate against : ,good business in respect of future loans. The general public, wc fear, trouble very. little aboiit. the intri- . , cacies of these loan transactions, or our "wizard of finance" would not venture on quite such sweeping statements concerning his financial achievements.