INTEREST PAYMENTS

Evening Star, Issue 21515, 13 September 1933, Page 3

INTEREST PAYMENTS

TO BE MADE IN NEW ZEALAND CURRENCY SOUTHLAND POWER BOARD'S DECISION [Feb Ukjted Press Association. | INVERCARGILL, September 12. By 11 votes to 1 the Southland Electric Power Board at its meeting today decided to rescind its former resolution to pay interest on its London loans in sterling, and later carried a resolution to the effect that it would pay in New Zealand currency, but would facilitate a test case regarding the matter if the bondholders desired.

The question of interest payments was the main topic for discussion at the meeting, which was a protracted one, and several of the issues were considered in committee. The majority of the members agreed that the board was under no legal obligation to pay in sterling, and that if there had been a moral obligation to'pay this had been nullified by the action of the bondholders in England in refusing tq accept a lower interest rate as practically all other bondholders had done. It was stated during the discussion that the board’s decision would mean a saving of £20,625 to users of electric power in Southland. Mr W. M'Chesney moved the following resolution ;—“ That seeing the contract between the London debenture holders and the board gives the hoard the option of paying interest instalments in New Zealand currency, and that the Minister of Finance (Mr J. G. Coates) advised the board to take steps to apply for a test case in London with a view to enabling the board to pay interest in New Zealand currency, and after having the opinion- of Sir Gerald Hurst, K.C., London, supported by the opinion of the hoard’s solicitor, Mr William Macalister, that the contract between the London debenture holders and the board enabled the board to pay interest in New Zealand currency, and as a result of the Government refusing tho board the advantage of temporary financial arrangements in London _ (which was assured) and thereby saving exchange amounting to £20,000 per annum, the resolution of the board carried at a special meeting on August 4 agreeing to pay the September instalment of interest in sterling be rescinded.” “ In asking the beard to rescind tho motion carried on August 4,” said Mr M'Chesney, ” I think it will be agreed that if the motion is rescinded it will be one of the most momentous decisions arrived at by tho board since its inception. If it is not rescinded the board will have to find £20,625 as exchange on its interest payments. In the meantime provision is made for the payment of interest instalments in New Zealand currency. That is not disputed. It is tho legal position. Thp board has had legal advice on the matter from Sir Gerald Hurst, and his opinion is that the hoard has a good case and should succeed. Furthermore, when the hoard first considered tho matter Mr Coates advised it to have a test case.” The chairman (Mr W. Hinchey): I don’t think you should say that Mr Coates advised the board to have a test case. Mr Coates raised that point when we -were in Wellington, and raid that he had not advised a test case. He had merely suggested one. Continuing, Mr M'Chesney said that the action of the board if it decided to rescind the motion would' probably be called a default in some quarters, but in his opinipn it was not a default. It was stated, he said, that the Prime Minister (Mr G. W. Forbes) gave a pledge that the board would make thispayment in sterling. If he did so lot the Government make up the difference. The board’s trouble was caused by the Government raising the exchange rate, so the Government was responsible for the deficiency. Mr Coates had said that Now Zealand’s credit would be damaged. ' If it were necessary for the Southland Electric Power Board to pay £20,000 as exchange to maintain tho credit of the dominion it was not the duty of the people of Southland to make tho payment. It was the duty of the country. Tho motion was seconded by Mr J. T. Carswell, who said If we pay in New Zealand currency wo have fulfilled our contract. We have only got to consider our legal obligations, and there is no room for sympathy for tho bondholders who can only receive exchange at the expense of the people of Southland.”

Mr A. A. Mac Gibbon, who was the only one to oppose the resolution, expressed the opinions that Sir Gerald Hurst had never said they could pay in New Zealand currency. He had asked for a tost case. As to asking the debenture holders to take eel,ion, that was cowardlv. He objected to trying to boat ” them,. Mr IC. K. Sim said he would be sorry to embarrass the Government, but interest rates had to be brought down. The board had tried to get a reduction but could not, and in his opinion the only thing they could do was to take action along the lines proposed in the motion.

Mr Hinchey said the matter was a very serious one, but he knew members of the board had considered both sides of the question. It was the wish of the Government that the board should pay in sterling. The reason for that was mainly that the Government and local body debt in London was very largo, and the Government feared that the action of the board, if it paid in New Zealand currency, might seriously affect the credit of the Government and other local bodies. There was a lot of feeling about the matter up and down the country, and many people would like to sec the board carry the motion. That attitude was mainly due to the objection to the increased exchange. The Government should have taken steps to have interest reduced, hut it had not done so. If interest had been reduced the hoard would riot have been troubled.

After the resolution had been carried the following motion was adopted without dissent;—“The hoard, having been advised that as a matter of law the interest is payable in New Zealand currency, resolves to make payment in New Zealand currency with an intimation to_ the-debenture holders that the hoard is willing to facilitate a ruling being obtained later if they so wish.”