THE CONVERSION LOAN.

New Zealand Herald, Volume LXVI, Issue 20363, 18 September 1929, Page 10

THE CONVERSION LOAN.

The statement by the Prime Minister of the arrangements for the completion of the conversion operations confirms in greater detail tlie information previously telegraphed from London. Referring to the terms offered to holders of the maturing stock who desire to renew their investments, Sir Joseph Ward says the total cost of the new loan, presuming redemption in 16 years, will be £5 7s 8d per cent. This is a much higher rate than was paid for the previous conversions or for new money for some years, but, in the circumstances, there was no escape from it. It may be presumed that consideration was given to the alternative of temporary provision by the is'sue of Treasury bills, and that advice from London was unfavourable, in view of Australia's experience having indicated a G.| per cent, rate and especially of the uncertainty whether refunding of the loan would be possible in six or even 12 months on more favourable terms than have now been offered. Including the present transaction, the position appears to be that conversions in London will have accounted for £21,729,400. while £3,700,000 will have been redeemed, £1,202,500 by the use of cash from the Debt Repayment Account and £2,497,500 with the proceeds of fresh borrowing, including £1,925,500 in New Zealand. Apart from the loan expenses and the cash bonus on the present issue, which may be anything up to £IOO,OOO, this leaves about £4,001,000 to be provided in cash by November 1. It has been generally expected that the public in New Zealand would be given opportunity'to subscribe to a complementary loan, but the Prime Minister docs not give a hint of a public issue. He speaks .of a policy of "applying our local resources to the utmost," but so far this is represented only by borrowing, presumably departmental funds, to pay off £1,925,500, and utilising £1,202,500 of the debt redemption fund, the value of which has thus been demonstrated. But the £4,000,000 odd are to be drawn from "cash already temporarily invested in London," the depletion to be restored at some undefined date "from local sources." Had this statement been published in London simultaneously with the loan' prospectus, the press testimonials might not have been so generous. By what means has the Government accumulated £4,000,000 of temporary investments in London, unless they are the balance of the £7,000,000 loan for public works last January 1 That is the interpretation that will inevitably be placed on the Prime Minister's statement. The impression has been created, and fostered by the Prime Minister's quotation of London comments, that about half the outstanding debt is being paid off with funds drawn from domestic resources. Now it Is revealed that the only immediate contribution from New Zealand is the £700,000 from the Debt Repayment Account, so thai; over £9,000,000 is to be covered in London, partly by the new conversion loan and partly by the use of funds previously borrowed in London. Since London is fully cognisant of the abundance of money in New Zealand from which the cash required could easily have been drawn on favourable terms, full appreciation of the Government's plan may turn present cordiality into a very different attitude.