PROTECTING OVERSEAS BUYER

Evening Star, Issue 21582, 30 November 1933, Page 5

PROTECTING OVERSEAS BUYER

SPECULATION IN DEBENTURES OBJECTS OF LOCAL AUTHORITIES BILL [From On: Parliamentary Reporter.] WELLINGTON, November 29. New Zealand local authorities have already secured approval from the Local Bodies Loans Board for conversion operations involving seven millions lingThis fact was stated by Mr Coates, Minister of Finance, in moving the second reading of the Local Authorities interest, Reduction of Loans, and Conversion Amendment Bill in the House. The measure, he explained, will stabilise local body interest at 'LI per cent., and the amending Bill had been asked for by the local authorities themselves, primarily to make the position clear in relation to the overseas investor. The reduction in interest applied only to securities held by the New Zealand nationals. The first Act, passed on March 9, 19152, and the 20 per cent, interest reduction came into force on April 1 of that year. Some securities had an optional place for payment of interest, and, although the last payment prior to January 1, 191515, had been in Now Zealand, they had actually been disposed of to overseas buyers prior to the passing of the Act, and buyers believed that they bore the rate of interest stated on the bonds. Mr Langstone: Can the Minister find out the amount of debentures sent overseas? The Minister replied that the question evidently related to the possibility of people sending debentures overseas for the purpose of profiting on the exchange. “ 1 have not been able to find one instance,” he continued. “No doubt there are sonic, but it lias not been wholesale. But it is impossible to find out. If some speculation did take place, I do not know bow wo could avoid it, but this is definitely to prevent lligbt of tins kind in future.” When it was discovered that it was possible to speculate in these securities, the London Stock Exchange, said Mr Coates, was approached to give an undertaking that it would deal in no securities after April last, and no sales had been made. The banks, and everyone it was possible to get into touch with on the matter, had also been approached, and the request bad been complied with. The primary object of the Bill was not to safeguard the New Zealand national, but to enable New Zealand authorities to keep faith with the overseas buyers, and thus preserve their credit on the London market. This was essentia] to get satisfactory terms for the renewal of maturing loans. The legislation also included points which bad resulted from experience of the original Act. It would enable local authorities to get the maximum benefit from loan conversion. Separate rating areas in the counties could bo consolidated for conversion purposes, but tin’s was not compulsory. The Bill also gave the right to take over debts from another local authority, such as in the case of an electric power board which took over a reticulation system. ft would then take over the local body debt in respect to it.