CONSOUDATED LOAN.

Manawatu Times, Volume XLVII, Issue 2762, 2 October 1923, Page 4

CONSOUDATED LOAN.

QUESTION OF CONVERSION. SPECIAL LEGISLATION REQUIRED, According to the legal opinion ol Mr C P. Skerrctt (Wellington) special legislation will bo required for the Borough Council to convert the debentures on the £186,400 consolidated loan, from 7 per cent, to 6 per cent, interest, and from a period oi ten years duration to twenty years. A discussion on the loan was introduced at the Council meeting last evening by the reading of a letter from the Mayor, Mr. F. J. Nathan, written in Australia, acknowledging the cable from the Council agreeing to the A.M.P. Society's terms for the conversion of the consolidated loan of £186,400. The town clerk read th e legal opinion of Mr. C. P. Skerrett, forwarded by Messrs. Chapman, Skerrett, Tripp and Blair, which pointed out that, although Part 5 of the Local Bodies Loans Act provided for the conversion of the bonds, an amendment carried by the Finance Act, 1921, made this impossible. It was agreed that the limitation as to the rate of interest which conversion debentures would bear to 5 per cent, per annum imposed by Section 101 of the LocaJ, Bodies Loans Act, 1913, had been removed by Section 11 of the Finance Act, 1921, as amended, but it was considered that this clause was sufficiently wide to embrace Part 5 of the former Act. It was further pointed out that Section 102 of the Local Bodies Loans Act, 'which related to conversion debentures, provided that no debenture issued under Part 5 of the Act should be sold at a price that would* produce to the purchaser, thereof a greater interest than a specified interest per annum. The effect of this provision was that tho debentures securing the converted loan could only be issued to the A.M.P. Society at a premium, so that the rate of interest receivable by the Socieo should not be more than this sum. This section had never been amended. As the Legislature thought it was deal ing only with loans under Part 1 or the Act, it abolished the restrictions on'the rate of Interest, which the debentures so issued were to bear, and as it thought it was not dealing with conversion debentures/ it did not alter Section 102. There was, the letter concluded, no similar provision to this section relating to debentures issued under Part 1.

The deputy-Mayor, Cr. F. Jackson, said it was apparent that the arrangements contemplated could not be carried into effect under the provisions of the Local Bodies Loans Act, ana special legislation would be necessarv to make this possible. This meant a delay until a chance was secured to have provision made for it in the next Washing-up Bill. While in Wellington recently, he, together with the town clerk, had interviewed the manager of the A.M.P. Society and later Mr. Skerrett, and together they investigated the question. It was.understood then that the arrangement would be impossible without further legislation, though Mr. Skerrett's banished that possibility. The speaker had, however, been assured that it might be possible to arrange with the A.'M.P. for a lower rate of interest until the necessary legislation could be passed. It had been sup gestcd that steps be taken by mef.ns of an originating summons, but this course was considered inadvisable. As far as he could see, there was but one course open to the Council —to cable the Mayor and ask him if he would arrange with the society in Australia to accept a lower rate of interest from the present date. Cr. Oram: In other words, when the legislation i 3 passed, ante-date it. Cr. Jackson: Yes, the matter woula be held up until legislation is passed. We want a lower rate of interest. Cr. Fltzherbert moved that the Mayor be asked to arrange with the A.M.P. Society in Australia for a lower rate of interest to be charged, subject to the passing of legislation in this connection.

Cr. Oram seconded the resolution, which was carried.

The special order authorising the raising of a loan of £4240 for Gorge improvements was confirmed. A letter was read from the Union Bank, with reference to Manawatu Gorge improvement loan of £4240 and advising that brokers approve of specimen copy of debenture and coupon as drafted.—The town clerk said the arrangements in connection witn the loan were practically completed.