FRIDAT, MAY 17, 1895.

Evening Post, Volume XLIX, Issue 116, 17 May 1895, Page 2

FRIDAT, MAY 17, 1895.

WHAT CONVERSIONS COST. ♦ Evebtone has heard of the blessed word • Mesopotamia. Its very unmeaningness gave great consolation to tho old lady. There are many words we nse that convey no sense to many people. Ono word tbat will, we expeot, be used very often daring the next' few months, is the word " conversion." What does it mean ? We doubt if the people really understand that conversions are an insidious way of increasing the colony's burdens. It is better for us to take an example of what was dene during thft fin&noial year 1893-94. "We converted three loans in that year— one for .£500,000 under the Loan Aot of 1863 due in 1915, one for £400,000 due in 1893, one for £2000. Now, if we had followed the advice given by eminent financiers, we would not have given in eiohange for the debentures of .£902,000 many more dubentures. What did we do ? We issued no less than .£1,038,180 worth of 3* per oent. stoolc-that is, we increased the debt of the colony by no less a sum than £134,180 ! Take our £500,000 loan, for which we were paying 4 per oent We gave the holders of that stook £85,000 a B a premium to surrender their loan— to acoept conversion! The interest we saved was £525 per year, and for that we inoreased our debt by £85,000. But that was not all, for conversion cost us brokerage, commission, stamp duty, benefactions in the way °L m i?! eB i If ?"■? be added (and it was added) to the capital debt of the oolony, we made no saving in interest. The charges for brokerage, 4c, and expenses, amounted to no leas a sum than £54,904 15s lid. If we paid suoh a premium (£85,000), besides* brokerage, interest, expenses, Ac, &0., for a conversion of a loan due in 1915, and when our 4 peroents. were only a little above par, what premium would now be asked for our 4 per cents, at their present prices, and whioh are not dne till 1929? We think we have said enough to Bhow that conversion at any fair rate is impossible. It would be a flagrant disregard of the future, and of the true interests of this oolony, to enter on a soheme of conversion. Those who hold our bonds at 4 and SI per oent. will not surrender them for bonds bearinglessinterest— for3peroent. bonds— exoept at a very handsome premium, and that would be bad finance for us. If our bonds had been at short terms, conversion might, with the present fall of interest, have been easy if we had extended the terms of oar bonds. Suppose our bonds had had only seven years to run, we might have issued bonds at 14 or 17 years at 3 or even 2j per oent., and got them off at no very large premium. Bnt our 4 per oent. bonds have a onrrenoy of 34 years, and our 3} per cents have 45 years to run. No one will surrender these bonds for 3 per cents exoept at a large premium. We paid 17 per oent. premium for the surrender of 4 per cents with only 21 years to rnn, and then we gave debentures with 47 years' onrrenoy in exohange, bearing 3J per oent. interest. We warn the publio that any conversion at present means a heavy future liability oast on the colony. In. the past we have, by oonversions, added about two millions to the capital debt of the colony. This is money given to London capitalists. It is no wonder that many of our colonists objeot to foreign loans, and to beintr exploited for the benefit of absentee capitalists who bear none of our burdens Every new loan inoreasei our bondage. A conversion scheme cannot save us, beoause our loans have suoh a long ourrenoy. If, we repeat, our loans Had a short ourrenoy, we might have oonverted them, and, seeing how oheap

money is, our burdons might have been considerably lightened. But wo are oertain that any financial aid — any present lessening of our burdens — would bo at the cost of a very heavy burden being cast on posterity. And that wonld not bo honufct. It would be bad finance and worse statesmanship,