OVERSUBSCRIBED

Dominion, Volume 22, Issue 92, 12 January 1929, Page 11

OVERSUBSCRIBED

NEW SEVEN-MILLION LOAN

WHAT THE MONEY IS FOR

STATEMENT BY MIE MINISTER

The cash portion of the New Zealand loan, amounting to £7,000,000, has been over-sub-scribeil according to a Press Association cablegram _ from London. The Prime Minister (Rt. Hon. Sir Joseph Ward), in a statement to the Press yesterday, indicated fliat tlie money would be used for public works, including railway construction and improvements, and hydroelectric schemes. Reference was also made to the conversion loan of £12,000,000.

Sir Joseph Ward said that until yesterday morning he had not been in a position to make any public statement regarding the floating of the loan. Those who were familiar with the procedure of raising loans in. England were fully aware that the Minister of Finance in this country, or in any other country that was negotiating the underwriting of a loan ip England, could not publicly' discuss any details whatever until those who had underwritten the loan had had the fullest opportunity of obtaining subscriptions from investors in London. He had only yesterday morning received by cablegram the release which the responsibilities of his position required before he did anything here that could easily prejudice, and in all probability greatly hamper, the disposal by the underwriters of the £7,000,000 and the big responsibility that they had undertaken. The Deferred Decision. “I was in the same position during the recent sitting of Parliament,” said. Sir Joseph Ward, “and it was to me a source of intense surprise that any member of Parliament, tvhen I indicated that I could not give details on various points, should deliver speeches and press for information that only a full sense of my responsibilities stopped me from giving. I may now say that when I took office on December 13 I became aware of the whole position. I was quite aware before taking office of tlie- whole of the. maturities that had to be provided for by way of conversion ! I had no knowledge whatever of what the proposals of the Minister of Finance (my immediate predecessor) were, but I found that he had held over his final decision. The proposals that had been made were for a cash loan of £5,000,000 and conversion of £10,000,000 of the 1929 maturities, to be made in the present month. The cash issue, i.e., the £5,000,000, was to cover requirements, up to March- 31, 1930. That arrangement meant, therefore, no borrowing in London during the financial year 1929-30. A Material Alteration.

“I came to the conclusion after mature consideration, reluctantly but definitely, that those proposals would not meet the requirements of the country, and I had, as the responsibility of financing the country then rested upon me, to make up my mind whether to make a material alteration iu the proposals. This I finally decided to do —that was, to increase the amount of cash to £7,000,000 and the amount for conversion to £12,000,000. As I came into office pledged to at once put in hand four important railway lines and provide for State, advances as well as carry on other works, the proposition I found existing obviously gave me some concern, in view of the policy I had promised the country, and I had to reconsider my plans as far as immediate action was concerned in or-, der to assure the railway extension proposals and the State Advances to Settlers. I decided to increase the loan from £5,000,000 to £7,000,000 for public works, including railway construction and improvements, and hydro-electric schemes. I may mill that I had tentatively arranged, if required, to obtain an additional £2,000,000 locally, to ensure that all purposes that I had publicly laid down in the policy as submitted to the country would be provided for. Imperial War Loan Conversion.

“Among many matters that outsiders and the whole of my critics knew little or nothing of was the important consideration affecting London borrowing in the coming year, the large Imperial War Loan conversion of about £2,000,000,000 to be dealt with, ps well as the uncertain effect on London finance of the changing conditions of the American market, which in recent times, as anyone who takes an interest in matters of the kind knows, are very unusual both in the magnitude and variation, and are a great factor nowadays in directly and indirectly affecting London at various times. Return to Investors. “The new 4j per cent, cash loan is £7,000,000, maturing in 1948-1958 is

being issued at £95, which will return investors about £4 16s. 4d. per cent., allowing for the redemption of the discount on issue over the period of 29 years, as compared with £4 19s. Bd. in the case of of the last 44 per cent, loan of £5,000,000, issued in May last, at £94 10s., maturing in 1947. The £12,000,000 conversion now offered is at £lO4 ss. for every £lOO of the old stock, giving investors a return of approximately £4 15s. 3d. per cent., allowing for the redemption of the premium over the period, compared with £4 16s. lOd. in the case of the £5,000,000 conversion in May last, .when £lO4 10s. of the new 41 per cent, stock was offered for every £lOO of <ie old 41 per cent, stock. “Good Effect in Dominion.” “It will be seen, therefore, that notwithstanding many factors that may have operated adversely, the transaction is comparatively better than the previous loan, which broke the 5 per cent, rate obtaining in London for some years previously, and it is reasonable to claim that the country’s high credit has again merited the confidence of the London market, particularly as the £7,000,000 cash issue has been fully subscribed. That the loan has had a good effect throughout New Zealand is beyond all question, as the communications to me yesterday enthusiastically acclaim. As typical of them, I may add that one large firm said: ‘Have cabled London, doubling our orders. We feel that there are prosperous times ahead of New Zealand.’” The Prime Minister said he had no comment to make about one or two of the Press criticisms. It had been quite apparent for years that there were some people who put politics before everything, and would apparently be delighted to see a breakdown in great financial operations that directly affected, and if successful benefited every class of people in the country, quite irrespective of their politics. What one did marvel at, he added, was the utter lack of judgment and discernment shown by some who professed to lead or guide public opinion, and their obvious want of knowledge in taking a fair view of anything, especially if it emanated from a political opponent. “Untrue Rumours.” “I took an opportunity in December of advising the London Press and the High Commissioner that the rumours about the proposal applying to the raising of £70,000,000 in one year were quite untrue," Sir Joseph Ward explained. “As a proof that I anticipated any such rumours I cabled on December 20 to the London Press a statement of my proposals. As a result the following is a quotation cabled to me from the ‘Evening Standard,’ dated December 20, one of London’s leading journals which published the statement of its own accord —and that is the best answer to erroneous rumours that were circulated at the time: —‘It may be mentioned that it is now accepted by the London market that Sir Joseph Ward, the new Prime Minister of New Zealand, fully realised the importance to maintain New Zealand credit here, and that he will do nothing which will weaken the high esteem in which that Dominion’s securities are held, by British investors.’ “The successful result of these very important and large transactions,” the Prime Minister concluded, “indicates clearly that after my proposals received the scrutiny of the highest London financial authorities, who are the greatest financial critics in the world, one need not feel in the least perturbed by some of the party statements that were promulgated here.”