INTERNAL LOAN

Greymouth Evening Star, 16 May 1939, Page 7

INTERNAL LOAN

MR. HAMILTON’S COMMENT

“WILL CAUSE SOME SHOCKS"

[PER PRESS ASSOCIATION.J

INVERCARGILL, May 15

“1 wonder if the Prime Minister got tliis loan and interest rates unanimously endorsed at the recent Labour caucus,” said the Leader of the Opposition (Mr. Hamilton), commenting to-night on the Government’s internal borrowing proposal. "This is certainly an interesting turn of events for a Prime Minister who spoke so much about the use of the public credit, and debt free money, and said that further borrowing was only a. debt in perpetuity. Has he also become an orthodox financier? “The terms and amount of this loan will certainly cause some shocks. They will cause a shock first to those who supported the Government in the hope that such loans and interest rates would never again be necessary. Second, local bodies who have been held down to ?,l per cent, will now be bewildered; and third, those industries, both primary and manufacturing, which iieed added capital to expand, will now find money harder to obtain.

“It would appear that the Government is going to have its money needs satisfied before it allows others to compete against it in the money market,” Mr. Hamilton continued. “Perhaps much of this money already has been spent, and part of the loan may be needed to repay temporary advances. The long term loan would appear, after a hurried calculation to give a return of about £4/8/- per cent, while the shorter term will return about £4/4/- per cent. At the present time this would appear a fairly attractive return to investors if, indeed free cash is available for investment,” Mr. Hamilton concluded.

STOCK EXCHANGE STATEMENT

AUCKLAND, May 15

Following consideration of the preliminary announcement of the New Government loan on the Auckland Stock Exchage, the officials of the exchange made the following statement: —

“The issue should be favourably received by the investing public, and the flotation should be successful. The longer-dated issue would appear the more attractive to the ordinary investor. and the provisions in the event of the market selling price falling below the price of issue should appear as a safeguard against capital loss. The issue will be advantageous to those wishing to make provision for death duties.”

The immediate effect upon the giltedged market was a withdrawal of buyers, pending receipt of full details of the proposals. Sellers, who have not been plentiful during the past week, were even fewer.

CHRISTCHURCH OPINION CHRISTCHURCH, May 15. Commenting on the loan issue, the chairman of the Christchurch Stock Exchange, Mr. H. Kitson, said: “I think it is really an excellent loan. The Government has made the conditions very acceptable to investors, and it should get the money inside'a week. It has come on the market at the right time, too. The conditions here and in America and England are bettex* than they have been for some time.” According to the prospectus, the money is to be used fox* public works and general developmental purposes, including capital expenditure on defence works. The loan is considered in the city to be an attractive investment. The return on the first form of issue for the full term of 19 years is £4/374. Based on redemption at pax* on May 31, 1958, the return is £4/6/4. On the second form, the return, interest only, is £4/0/10, and allowing for redemption at par it is £4/2/7. The prospectus contains a number of provisions, calculated to encourage investors, which have not before been included in prospectuses of New Zealand Government loans. They are: —

(1) The loan maj* be paid in instalments, as follows: —First form: On application, £lO per cent.; oxx Friday, June 30, 1939, £4O per cent.; on Friday, August 4, 1939, £46 per cent. Second form: On application, £lO per cent.; on Friday, June 30, 1939, £4O per cent.; on Friday, August 4, 1939, £49 per cent. (2) If the market selling price of the £4 per cent, loan, 1954-1958, falls below the price of issue, namely £96 per cent., sums will be made available annually, as required, up to a total of 5 per cent, of the amount of the loan outstanding at the end of the previous financial year, fox - the purchase fox* cancellatioxx of such stock on offer below that price. (3) Stock of the £4 per cent, loan, 1948, which has been in the beneficial ownership of a holder fox* a period of at least six months before death, will be accepted at par at any time before maturity in payment of death duties in respect* of that person’s estate. (4) Transfers which may be made in amounts of £5 ox* multiples thereof, will be registered without payment of any fee. On the transfer of other Government loans, there is a 5/- stamp cliurse. (5) Certificates of title will be issued without payment of any fee. The charge on othex* Government loans is 2/6. (6) Any person of the age of 10 vears ox* upwards maj* be registexed as the holder of stock and may execute transfers. Applications fox* the loan xnust be for sums of £lO ox 1 multiples thereof.

LONDON INTERESTED.

(Recd. May IG, 10.40 a.m.) LONDON, May 15.

The City is interested in the innovation in the New Zealand internal loan, whereby an alternative date for repayment is provided. Some observers consider that this method may be adopted in British financing.