STERLING EXCHANGE

Gisborne Herald, Volume LXVII, Issue 20140, 9 January 1940, Page 9

STERLING EXCHANGE

EXPLANATION OF FALL THE £17,000,000 LOAN REFUNDING COMPLETED (Special to the Herald.) WELLINGTON, this day. The fall of L 1,680,000 in the Reserve Bank’s holding of sterling exchange shown in the return published last week transactions relating to the repayment of the New Zealand 31 per cent 1940 loan of £17,172,191 due on January 1. Terms for this operation were arranged by the Minister of Finance, the Hon. W. Nash, during his visit to London in JuneJuly last. It will be recalled that Mr. Nash arranged the conversion of the loan by raising a new loan of £16,000,000, since £1,172,101 of the loan was to be repaid from accumulated sinking funds. Such was the state of New Zealand's credit in London at the time that the loan was not underwritten and it was generally understood that the banks were called upon to guarantee £6.000,000 and the Bank of England £10,000.000 although no definite figures have been stated. QuotaUons for the original loan from London, where it stood at £IOO or. December 16, were suspended in the week prior to Christmas, while on December 28 the statement was cabled that the loan had been repaid. Repayment entailed lin addition to the original capital provided in London by the refunding arrangement a half-year’s interest amounting to around £300,000. As part of the conditions of the financial accommodation given for the refunding of the loan the New Zealand Government undertook to provide for the redemption of the stock sufficient sterling to repay £2,000,000 of the issue in 1940 and £3,500,000 in each of the four succeeding years, the whole loan thus being repayable by January 1, 1945, It was stated in the prospectus of the loan, however, that instalments would be made available in each year on or before June 30 and December 31, respectively, commencing June 30, 1940. Apart from interest commitments in relation to the loan refunding, the Government also had fairly heavy interest payments to meet on January 1. These, in addition to the £300.000 due on expiring loan, would total about £500,000, while something over £IOO.OOO would need to be set aside for interest on local body loans, due on that day. The Hon. W. Nash stated to-day that advice had subsequently been received that the loan was fully subscribed for and, considering the unsettled international situation existing at the time, the reception given the issue must be regarded as satisfactory. The difference between the loan of £17,172,000 and the new loan of £16,000,000 was provided in New Zealand and the holdings of London subscribers who did not wish to convert were redeemed on the due date.

v. Claridge 15; Smith 22 v. Peko 11; Glennie 15 v. Watson 10; Bennett 20 v. Fuge 12; Lett 31 v. Topp 15; Whittle 22 v. Dickson 18. Section R.—Auld, 26, v. Smith, 12; Carswell, 19 v. St. John, 12; Heazelwood, 17, v. Macklow, 16; Reid, 23, v. Brown, 20; Sutton, 15, v. Wenham, 9; Hilton, 17, v. Paul, 11; Wilson, 25, v. Edmonds, 10; Roach. 24, v. McKenzie, 11.