Conversions—When Proper.

Evening Post, Volume XLIX, Issue 116, 17 May 1895, Page 3

Conversions— When Proper.

[An extract from Leroy Besulieu's Traiti de la Scisnce dcs Finance* ] 1. A conversion of debt bearing a high Interest into a debt bearing a lower rate is a very praiseworthy operation. It can be done because of the right of repayment which belongs to the State, as to all debtors in general— the rights of the creditor are not injured by it, as every regnlar conversion ought to offer to the stockholder the option of either repayment at par of his" debt, or the acceptance of a less rate of interest. 2. Optional conversions should be condemned. Every oonversMnTshould be obligatory—that is to Bay, general to all holders of stock of the same kind and of the same issue. Every conversion should be, bsaides, a very simple operation, permitting two terms only, acceptance of a loss interest, or repayment at par. 3. Conversions of pnblio debts ought to be made without notably increasing the total amount of the national debt— that is to say, by the simple exchange of a debenture at par for another debenture bearing less interest but issued also at par. If this rule is sometimes infringed, it should be in a very alight degree. We should never conveit bonds at par for bonds which are not near par, and thus give to the (stock-holders a, nominal capital mnoh greater than the nominal oapital of the previous debt. 4. In making a conversion we should ever have in view a further conversion at the end of some years, but to facilitate the acceptance by the stock-holders of the new debentures bearing less interoat than the old, we must suspend the right of repayment, that is to say, the ulterior conversion of the new debentures, for five or ten years or more. 5. Conversion is an operation whioh is not unpopular when it is made regularly and simply at an opportune time, Without going for proofs of this to England oi America, we need only refer to the greal meaanre of 1852, whioh did not cause ii France any adverse critioism. 6. A conversion can operate upon a con siderable mass of debentures and upon t payment reaching a very large amount five, or six, or seven thousand millions o capital have been thus several times con verted in Prance, in England, and ii America, and without the least trouble, and without it being necessary to have more than 100 to 150 millions of franoß to meet the repayments. 7. When a conversion is rendered feasible by the matket prioe of the various publio funds, this operation becomes an imperious duty and » State obligation. In keeping back conversion simply to save the interests of the bondholders, we commit towards taxpayers a real aot of spoliation, we make them pay what they ought not, or what they ought not longer to pay.