NELSON CITY COUNCIL

Nelson Evening Mail, Volume LXVI, 18 June 1932, Page 2

NELSON CITY COUNCIL

LONDON LOAN RENEWAL STATEMENT BY THE MAYOR The Mayor (Mr W. J. Moffatt) in accordance with a promise made recently, has prepared the appended statement bearing on the Council’s negotiations for the renewal of the loan in London. Application to the Local Bodies’ Loan Board for the renewal of the Electric Light and Antecedent Liability Loan of £IOO,OOO raised in London ten years ago and maturing oil Ist May this year was made last July by the Nelson City Council. The original loan was £70,000 for electric installation and £20,000 to pay oil' the city’s overdraft. With the sinking fund of approximately £IB,OOO, together with an amount of £2OOO of profits on fixed deposit, plus an amount to be taken from the last year’s profits, it was estimated that the loMi could ho reduced to £75,000 and application for this amount for renewal was made. Authority was given in August for renewal at 5 per cent, interest. The rate paid on the original was 5J per cent, with a sinking fund of 1J per cent, and issued at £1)8. On representations being made by the Council’s hankers that owing to disorganisation of the London money market authority should b e given to pay as ],jo], us 04 per cent., this was conceded by the Loans Hoard and the term of the new loan was fixed at 7 years witli a sinking fund of 2 per cent. Later, owing to financial conditions such as the rate of exchange, etc., the amount for renewal was raised to £78,000 and again because of the continuation of such conditions to £BO,OOO. The finance committee of the Council (the Mayor, Councillors Gibbs and Page) were commissioned by the Council'to handle the matter, frequently reporting to the Council thereon. With a view to cutting costs to a minimum j per cent, was paid the London branch of the Bank of New Zealand to ascertain liow the loan was held by English debenture holders so that those holders might b e directly approached and invited to renew at a rate of interest that would rule in the month of April. This information obtained from other banks in England was duty supplied; there being 25 large holders and 109 smaller ones. Desiring to save brokers costs an attractive and informative prospectus was prepared and printed in Nelson and a copy of this, together with a copy of the Sunny Nelson booklet for eacli debenture holder, was sent to the Bank in London foi distribution. An effort was also made to secure the services of the High Commissioner, Sir Thomas Wilford, of whom it was asked that he should interview if possible the principal debenture holders. The Government replied that such services could not ltf given to local bodies. Later, however, on Sir James Parr visiting Nelson lie was approached on the matter and wo believe that on his representations permission was given for the High Commissioner to take what may. be termed a friendly interest of an entirely unofficial character in the matterTaking advantage of this concession full information was then supplied direct to the High Commissioner. The bank rather unexpectedly intimated to the Council that they were going to commission brokers to effect tile renewal. This was a great disappointment as it had been hoped that the business could have been transacted directly between the hank in London and the holders, thus saving broker fees of 34 per cent. However, this condition had to be accepted, there being nothing else for it. With two other renewal loans maturing in New Zealand on the 'same date (Ist May) for which provision had also to be made, ratepayer will understand that the month, of April this year was an anxious time for the Nelson City .Council. Matters pertaining to these loans will he dealt with in a statement which will be made later, but it may be stated here that the renewal of the gas and water reticulation loan of £21,200, formerly bearing interest at GJ per cent., has been reduced in amount to £18,500 and successfully renewed at 5J per cent. Reverting, to the London loan: When in February it was expected that the exchange on London would rise to 30 per cent, every effort was made to remit £21,000 (sinking fund, etc.) to London, but great difficulties were met with from the bank and the sinking fund commissioner. Fortunately, however, the expected did not happen as the exchange was pegged at 10 percent. Provision was made with the bank that in the event of the loan not being fully subscribed 95 per cent, of the unsold portion should be taken up by the bank, the other 5 per cent, being subscribed by the City Council. On Ist April a cable was received by the bank as follows: — “Nelson City Council. Qur brokers consider proper renewal rates 04 per cent, but as most improbable obtain renewal to extent required even at that rate, they suggest offering at 0 per cent, in the hope that holders who wish to renew will accept that rate.” The Council, while hoping that as the result of the strenuous efforts made the interest would not exceed 5J per cent., had in these circumstances to accept and hope for the best at G per cent. The figures of the renewal having already been published, a summary of the position is that ’£40,000 was renewed by holders aial the bank took up £38.000, the City Council remitting £2OOO. It is a matter for congratulation that while other New Zealand loans raised contemporaneously only realised £9O 10s the Nelson City loan was raised at par, viz., £IOO. A communication received from the bank in London concerning this loan intimates that in view of the unfavourable market conditions for oversea local bodv loans, the pessimistic utterances in New Zealand which have been cabled over and published in the papers here, the Auckland riots and the uncertainty regarding the exchange position, all influenced the market. But the result of the offer must be considered satisfactory.

A good deal might he written concernin'' the large number of meetings of the committee and the Council during a very trying period, hut it may he hrieflv stated that the peculiar financial conditions prevailing during the last twelve months necessitated negotiations being conducted in a manner calculated to ensure success which in all the circumstances- it may be considered to have been achieved. It may be of interest, and no doubt a matter of regret to ratepayers, to know that the exchange costs in connection with the renewal amount to over £GOOO, in addition to this broker-

age and commission has to be paid amounting to about £ISOO. It will readily be seen by citizens that in all these circumstances that it has been impossible to complete the estimates for the year until the renewals and the costs incurred in connection therewith had been provided for.