CONVERSION LOAN TERMS

New Zealand Herald, Volume LXVI, Issue 20363, 18 September 1929, Page 13

CONVERSION LOAN TERMS

STATEMENT BY MINISTER,

PROVISION OF CASH PORT?ON«

USING FUNDS IN LONDON,

OVER £4,000,000 REQUIRED#

[by TELEG It APir, —SPECrA l iiepoiiter.J , WELLINGTON. Tuesday. ' » A .statement regarding the arrangements for the conversion and redemption of the £9,700,000 of outstanding 4 per cent. Consolidated Slock, which falls due on November 1, was made in the House of Representatives to-day by the Minister of : ' Finance, Sir Joseph Ward. He said the operation, which was the largest in ! * the Dominion's experience, hac\ now been practically completed. „ j At March 31, 1928, the amount outstanding in this stock was £29,490,852.. As a result of a £5,030.000 conversion by the former Minister of Finance, the Hon.: W. Downie Stewart, in May, 1928, tho subsequent purchase, with the proceeds of additional sales of stock, of £572,000, the conversion in January of £11,729,496, the local issues in redemption of £1.925,500, and the application of public debt repayment moneys totalling £502,500, the lium remaining for conversion at maturity was £9,731,356.

New Loan Costs £5 7s 8d Per Cent.

"A further conversion offer to the extent of £5,000,000 has just been underwritten and is now being made to holders," added Sir Joseph Ward. "The offer is of 5 per cent, stock at par, to mature on July 1, 1945, with the option of the Government redeeming on or after July 1, 1935, together with a cash payment of £2 per cent, on November 1; or as an alternative, present conversion afc the rate of £IOO of new stock for each £9B of the 4 per cent. 1929 stock surrendered.

"Allowing for charges and expenses and redemption of the premium, the interest cost to the State over the period of 16 years will be £5 7s 8d per cent. "Including the figures relating to -the conversion offer now being made, the annual interest cost to the State on the total stock issued in conversion or redemption works; out at an average of less than 5 per cent. , j

Transfer of £6,000,000 to Dominion.

"In regard to the balance of approximately £4,700,000 it is proposed to payoff the holders at maturity in cash. Funds for the purpose will be made available in London, firstly by the amount of £700,1300 provided for Redemption under the Repayment of the Public Debt Act, and secondly by utilising cash already temporarily invested in London, which will, as required, be replaced out of funds from local sources. The effect of this policy will be to bring the domicile of a fairly large parcel of the debt affected, approximately £6,000,000, from London to New Zealand. ■,

"As pointed out in the Budget, by tho time the whole of the 4 per cent,.* 1929 stock has been dealt with, it is calculated that the interest costs will be increased by about £220,000 a year. Utilising Local Resources.

"The methods adopted for completion of these conversions are regarded by our London advisers as a strengthening of our credit in London and considerably assisted them in their operations in a market very difficult for borrowers," the Prime Minister added. "Since >the beginning of the year, when it became ap. parent that international finance was adversely affecting London's resources, I have pursued the policy of applying our local resources to the utmost in assisting to lighten the final conversion, with tho result outlined."

Sir Joseph Ward said advices of press comment in London on the public conversion terms were venS. favourable and congratulated the Dominion on having found such a satisfactory way out of the difficulties arising from the present monetary conditions. The High Commissioner for New Zealand in London, Sir James Parr, had cabled the following summaries of some of the newspaper comments: — The Times congratulates New Zealand on paying off virtually 50 per cent, of the outstanding amount, and also refers to the interesting information regarding finance contained in the prospectus. After commenting on surpluses, public debt and State assets, the Times adds that it will be seen that the financial position of New Zealand is satisfactory. The Daily Telegraph refers to New Zealand's good record as. to debt management. The Financial Times states that New Zealand's credit will certainly not ba- ; diminished by the achievement of paying off half the outstanding amount. Tho Daily Express remarks that the fact that New Zealand has found monay to repay part of the old loan in cash has created a very favourable impression in the City* The Evening Standard states New Zealand is to be congratulated on having found a way out of the difficulties arising from the present monetary position.