The Dominion. TUESDAY, NOVEMBER 17, 1936. THE £13,930,000 LOAN

Dominion, Volume 30, Issue 45, 17 November 1936, Page 8

The Dominion. TUESDAY, NOVEMBER 17, 1936. THE £13,930,000 LOAN

Until further details concerning the applications received in connection with the Government’s £13,930,000 loan are available, will be impossible to form a complete judgment on the genera lresu announced by the Prime Minister on Saturday The position in plain language, was this: Loan money m stock or debentures total.i * £l2 400,000, bearing interest at 4 per cent., was due for repaymet in 1940’, but the Government had the right to repay the money in January next. By borrowing afresh at lower rates the Government stood to gain by a saving of interest. Holders of 4 per cent, stock or debentures were, therefore, offered the choice of reinvesting at per cent, for 20 years or 3 per cent, for 4| years, by converting their holdings, or of claiming repayment. In addition there was included an invitation to the public to subscribe in cash-cash being required to redeem such of the 4 per cent, holdings as might not be converted, and (to the extent of £1,530,000) for the purchase of the assets of the Southland Electric Power Board Broadly speaking, two factors determine the success ot a proposition of this nature. They are confidence in the Government and its policy, and the question which every investor asks himself when studying' the market: Is there a better investment elsewhere? lhe degree of confidence would be shown, first, in the total response .0 the offer, and, secondly, in the preference shown for the long-term as against the short-term investment. So far the first question only has been answered. Applications for conversion by 4 per cent, stockholders totalled £8,253,780. In other words holders representing £4,146,220 of the £12,400.000 stock and debentures declined to convert, deciding to claim repayment either from lack of confidence, or because they can see more remunerative investments elsewhere. On the othei hand, applications to lend new money amounted to £2 714,750, so the general response was £2,961,470 short of the £13,930.000 required and the deficiency, as Mr. Savage says, will have to be made up from “other sources.” ' On this analysis the Government’s appeal to the public cannot be regarded as notably successful. More detailed information, however, is required to enable finer deductions to be drawn. Meanwhile, it would be interesting to know how the shortage is to lie made up. The Government undoubtedly took a risk in offering a low interestrate investment at a time when more lucrative propositions were available. Market prices of other New Zealand 4 per cents., for example, are returning from 3f to 3-J per cent, to the investor. It is questionable, too, whether the confidence the public might have been prepared to extend earlier in the year has not been.weakened by the legislation of the Government’s first session.