CONVERSION LOAN

Evening Post, Volume CXV, Issue 66, 20 March 1933, Page 9

CONVERSION LOAN

THE VOLUNTARY ASPECT

MINISTER'S STATEMENT

• The latest return from the Treasury, issued this morning, shows that applications and promises to convert now total £88,250,000, or almost 77 per cent, of tho Government's whole internal debt. Applications received on Saturday covered .£2,250,000 worth of stock, but this amount should Ijo materially exceeded today, since there is now two days1 mail waiting to be chocked by Treasury officials. Although the scheme closes on Friday, all applications will bo accepted which bear Friday's post-mark from, any part of New Zealand, or which arc lodged with' any branch of any bank on that day. Since this means that at least part of the mail will not be received until the following Monday, the final lesult of the conversion will not bo known until early next week.

t The Minister of Finance, (the Rt. Hon. J. G. Coates,) discussed today the charge that has been niaae in some quarters that it is misleading to represent the conversion as voluntary when a penalty is provided for those holders who fail to convert.

"I think my attitude on this point has already been made amply clear," said Mr. Coatcs. . "It is true that under the terms of the Finance Act passed by Parliament a stamp duty on interest amounting to 33 1-3 per ■cent, will be imposed upon thoso bondholders who have not converted their securities by neA Friday night. But I must emphasise again that this penalty is not to be regarded as a, threat to bondholders in general. It is, on the contrary, merely an assurance to I the vast majority of holders who do convert that they will not be placed at a disadvantage by their rivals or competitors failing to convert. "I might quote as an. instance the position of mutual insurance companies or trustees," he continued. "Supposing the majority of .them accept voluntary conversion in good faith, but one of the companies .and £hrce or four trustees will not accept it and refuse to c6nvcrt. A most unfair situation is at once created. The company would hold itself iip as a hero and proclaim that what it-had done was done 'solely in the _ interests of its policy-holders. Similarly, a trustee who took up such an attitude would have a marked advantage over those trustees who converted. The majority of bondholders, I am convinced, realise the necessity for conversion and are ready and willing to convert, but one or two, if they were allowed to stand out, might be responsible for no end of heartburnings and create a position that would bo impossible. "It is perfectly true that no guch penalty as we contemplate was enforced in Britain's war loan conversion last year. But there the circumstances were entirely different. The loan had matured, and thoso who dissented were paid off. Our own debt is not immediately maturing, and there is no other way of ensuring full justice to all than by the provision of this penalty. I would submit that, considering the widely different circumstances, the penalty we have provided for nonconversion is. almost exactly on a par with the bonus which' the British Government offered for conversion. If the penalty is an inducement to convert, then the bonus was just as much an inducement. Yet no one would say that the conversion of the British war loan was not voluntary."