TRADING LOSSES

Evening Star, Issue 18979, 29 June 1925, Page 8

TRADING LOSSES

AFTERMATH OF BOOi TIES In view of the adjustments that have recently taken place or been proposed in regard to sonic of the loading commercial companies in the dominion, an Auckland ‘ Star ’ representative sought an expression of opinion from Mr Peter Barr, president of the Associated Chambers of Commerce of Xew Zealand. Mr Barr stated that, this was a. matter which in his view called lor most serious consideration on the part those interested in mercantile affairs. Twelve months ago lie, had observed what he considered a trend in the wrong direction, and had dealt with the matter at a meeting of Ihe Dunedin Chamber of Commerce. He had then pointed out that four or five years previously, not under stress of bad times, but. under the excitement of booming trade, investors had been invited by glowing prospectuses issued by trading companies in the dominion to advance money at very attractive rates of interest for' expansion of their businesses. Advances were made against bonds of debentures, which in some cases placed the holders without any specific security in a position even worse than that of ordinary creditors, in that payment was deferred for a term of years. He did not wish to refer to warnings which were then uttered regarding the danger of putting money into such hive.-i----ments, nor to the ample proof that had since been given to the justification of eiicit warnings, but to the fact, that proposals for compromise had been made by some companies. Of coarse, there wen 1 many companies which took oil these burdens of additional capital or liabiiilus and had since had to face vciy serious losses, yet were now carrying the load without any suggestion of endeavor lo avoid their engagements, and w»uhl continue to do 60 regardless of conseguenoes. In not a few cases, however, the holders of these bonds or dibentures, and, more serious still, even holders of preference shares, had had submitted for their acceptance proposals for varying and cancelling certain of their rights in order to avoid more serious loss to themselves and others.

He could not help feeling tint this was a. position which would involve much more serious consequences than mere monetary loss to the holders of either bonds or shares. It certainly would nman that mercantile houses would for years to mine find it exceedingly dillLnit to raise money in either of tLose form- even when what appeared to he ample, senility is offered. But more serious slid was the fact that it indicated a depailnre from the insistence upon the sacrmlness of contract, which had always been the glory of British trade and commerce. He fully recognised the ditlicnlties of the position in suc.lt cases ns had arisen as the result of the mistaken course of at lion taken some years earlier, and sympathised boiif with those in control and the sufferers. None the less, he viewed with crave coneern anything that even snggnted the damnable doctrine that contracts, if unprofitable, should not be carried out, even thoiwh to do so might involve I mg years of struggle. These opinions, voiced twelve months ago, said Air Barr, had unfortunately been confirmed by subsequent happenings. Adjustments to which Ids attention iuul now been drawn appeared to him as manifestations of flic same regrettable trend. It was, he said, nmeh to be regreU v.l that companies, particularly co-operative companics, had suffered so seriously through over-trading and failure, to recognise that conditions which at the tune seemed extraordinarily prosperous wera not likely to last. Undoubtedly it was the best course—indeed the only possible one—to adopt to face the position by writing off losses which had occurred and reducing properties and stocks to present-day values. There was no other coarse for an honest man to pursue. At the same time, he was bound to say that ho much regretted the way in which r-ome companies were asking preference shareholders to forego their rights. It only meant that ordinary shareholders wore not prepared to carry out the contracts they had entered into. Preference shareholders had put their money into various concerns on certain conditions, and ordinary shareholders were therefore in the position of borrowers. The losses which had been, made should fall upon those who under contract were entitled to tarry them.