COMPLETE SUCCESS

Evening Post, Volume CXVI, Issue 114, 10 November 1933, Page 5

COMPLETE SUCCESS

LOAN CONVERSION

MINISTER'S EVIDENCE

Tho success which attended the loaa conversion operations of the Government was dealt with'at some length' by, Mr. Coates, Minister of Finance, in the course of his Budget statement. ;

"The conversion was an outstanding success," said Mr. Coates, "and illustrated to the world the willingness of the people of the Dominion to make financial sacrifices in the interests of their country as a whole. The whole of the £115,000,000 concerned was con- ' with the exception of £475,000, equal to less than $ per cent; 'Approximately £356,000 of the, dissented stock has since matured and has been redeemed, .so that tho objective of taking off the market all stock bearing a higher rate of interest than 4- per cent, has for all practical purposes ; been achieved. The new Btocks bear interest at 3J per cent, in the case of v issues tho interest, on which continue* v to be free of income tax, and 4 per cent, in all other cases. The free of income tax concession continues until . the maturity date of the original securities, after which the interest oh' all. stocks will be at the rate;of 4-per.cent:, subject to taxation. The basis of,the conversion, however, was a. reduction ■■■,■ of 20 per cent, on the interest rates that previously obtained; but, in; order to obtain uniformity in the new .issues, any interest- due' over and above' 3J per cent, or 4 per cent.; as the case might be, was compensated for: on an actuarial basis by the issue of additional stock by way of premium or by payment in cash where small amounts were involved. . . "The effect on market rates of interest is fully up to expectations, for the now 4 per cent, stocks' are':being.;. sold on the market at higher prices r than rilled previously for ,5 per cent. - securities. Therein lies the proof of ' the real success of the, conversion ' operations." • ; LOCAL BODY LOANB. "In any plans for the establishment of lowei- interest Tates the securities issued by local authorities; could not be ■ overlooked, but owing to. the number and variety of such, bodies immediate conversion on a comprehensive basis was' not possible. Accordingly, as an. intermediate step to conversion by each... local i body concerned, a statutory ■: re*"., duction of 20 per cent, in the interest . payable on- all such securities,-but with a,minimum rate of 4J percent., was ; imposed. Local bodies generally, .Te-; cognising the benefits to be obtained" from establishing the lower interest rates on a permanent basis and at th» same time simplifying and consolidat-" ing their debts; are now engaged in ; drawing up schemes and making pre« parations for conversion operations. Numerous schemes have already beea ■, passed by the Local Government Loans Board and authorised by Order in Coun«il. In a number df other cases' ,th» preparatory work is nearing completion, and during the next few months a large number should be placed- beforo; tho bondholders. • -A' ■•■•■.' - "Special rating areas are causing difficulties in the case of some .local authorities, but it is proposed to bring down legislation to enable local authorities to amalgamate or suitably group such areas, or, where it can'be don;e , without inequity, entirely eliminate them and strike a consolidated rate for debt charges. r:■''■."''' ' "In order that the lower inteiest rates may be stabilised on a sound basis, I would urge every local authority that has not already done so to draw up an ©auitable scheme of conversion without delay and sutowiit it for approval to the Local Oovenunent Loans Board. I would further appeal to holders of local body securities to pUy their part in ensuring for the Dominion an era of cheap money that will protect investments by-maintaining values at a higher level and, generally he a powerful aid to economic recovery."