EXCHANGE ‘GRAVE MISTAKE’

Greymouth Evening Star, 4 July 1933, Page 5

EXCHANGE ‘GRAVE MISTAKE’

N.Z. BANKERS’ OPINION ADVICE TO GOVERNMENT [PETt PRESS ASSOCIATION.] WELLINGTON, July 3. Representatives of the bankers in Wellington express themselves as strongly of the opinion that the payment of debenture interest in New Zealand currency is a grave mistake, and is likely to lead to irreparable damage to New Zealand credit, on the London market. They say that loans were taken up on an understanding that they would be dealt with on a sterling basis. They say that payment in N.Z. currency may he the legal position, but that it is not honourable, and is not good policy. , Regarding Mr Forbes’s disclaimer of Government responsibility, the bankers’ comment was that Mr Forbes may, or may not., be aware the local bodies are acting under Governmental departmental instructions. As to whether the Government could do anything to mitigate the consequences apprehended', the rdply was that the Government should lose no time in assuring the British public that legislative steps would be taken at the earliest moment to assure those investors that they would be paidjn British currency, pending which payment will be made in British currency as it falls due.

WELLINGTON’S ATTITUDE.

WELLINGTON, July 3

The Mayor of Wellington, Mr Hislop, stated to-day that the Wellington City Council had arranged for the re•newal of its existing loans and also for the payment of the interest thereon in London in British currency.

“Up to the present, we have arranged, from time to time, the renewal of the existing loans in London on the basis of paying off in British currency. As we are able to raise the full amount of the actual original lean in London, and to retain sinking funds here against the new loan, the exchange does not affect this phase o£ the matter,” said Mr Hislop. “We have, however, continued to pay the interest on the outstanding loans in London in British currency. We are, of course, affected by the rate of exchange under this head. The first essential is to preserve our credit in London, and we, therefore, have been paying in British currency. However, the position may be, as Mr Allum suggests, that such payments are illegal, then; for the safety of the credit of ourselvbs, together with all other local bodies, it may be necessary to consider asking for legislation to rectify the position.” CHCH. COUNCIL PAYMENTS. CHRISTCHURCH, July 2. Christchurch City Council recently made interest payments on a loading loan of £220,000, raised in New Zealand between January, 1929, and July, 1930. One debenture holder, resident in the Channel Islands, was paid his half-year’s interest of £4OO in New Zealand currency, along with all the other holders of the stock in the loan.

OTAGO HARBOUR BOARD’S APPEAL LONDON, July 3. The London newspapers quote fully the Auckland Tramway Board's ex-, planation of its action which has been cabled through the Bank of New Zealand. This case is coupled with that of the Otago Harbour Board, regarding which the Board is announcing an interest reduction of 20 per cent. The Otago Harbour Board added: “It is probable that the Board will be issuing a renewal loan at London in the near future. We confidently trust that the effect of this legislation will not prejudice our position in your estimation.’ The “Financial Times” says that the ban on dealings in the Auckland Tramways Board’s loan on the London Stock Exchange was continued on Saturday. TRAFFICKING FAILURE. DUNEDIN, July 4. In reference to the interest payment, the interest on City and Harbour Board debentures fell due last Saturday, and the amounts were cabled to meet the interest in English currency. There has been considerable trafficking in Harbour Board debentures, many subscribers having sent bonds Home to gain the exchange benefit and evade interest reduction. In effect, they have been caught at their own game.

MERITS OF DISPUTE. LONDON, July 3. The “Daily Telegraph’s” Financial Writer says there appears to be some confusion here and in New Zealand regarding the Auckland Tramway debentures. The loan was originally issued in New Zealand, but part was offered for sale here in 1922 by the Bank of New Zealand on behalf of the tramway company. This offer specifically provided for payment of interest in London or Auckland, at the holders’ option. Consequently, the London holders’ position is not exactly comparable with that of the holders of issues made in New Zealand, dr holders of the Australian issue of Broken Hill debentures. On tho latter, according to the Appeal Court decision, interest is payable in Australian currency.

APPEAL TO COURTS. LONDON, July 4. “The Times” ( says it' would seem highly desirable in the interests of New Zealand’s credit, which has alwas stood high that the question be settled by stating a case for hearing by the Courts.