HARBOUR BOARD LOAN.

New Zealand Herald, Volume LXVIII, Issue 20931, 22 July 1931, Page 9

HARBOUR BOARD LOAN.

RENEWAL AT 6* PfR CENT.

DEBENTURES HELD IN BRITAIN. "BEST TERMS POSSIBLE." Special resolutions to renew a loan of £127,000 at 6g per cent, for a period of seven years, were adopted at a meeting of the Auckland Harbour Board yesterday afternoon. A criticism of the high rate of interest was made by Mr. T. Blood worth, but other speakers pointed out that more expense would bo involved by floating a new loan, although a lower rate of interest could be obtained. The loan is being renewed by the board for the purpose of repaying the principal of the amount raised under the Auckland Harbour Board Loan and Empowering Act, 1919 (second issue), not provided for by any accumulated sinking fund. For the purpose, one debenture of £127,000 is to be issued, or debentures of £IOO or multiples of that amount arc to be made available. It was decided to establish a sinking fund for the redemption of the debentures, at not less than 3 per cent, a year calculated on the amount issued. "This is a renewal of a loan authorised in 1921 for a period of 10 years at per cent.," Mr. Bloodworth said. "The same rate of interest is being agreed to in spite of what may happen within the next seven years. The debentures are held by one of the most powerful lending organisations in Great Britain, and yet we are told that the credit of New Zealand stands high abroad. I consider that this is an evidence of how high it stands." Criticism of Rate. Mr. Bloodworth considered the rate of interest was exorbitant for a redemption loan. He failed to see the use of a sinking fund at 3 per cent, unless it were to redeem the loan. It appeared to him that the effect of the sinking fund would be to make the burden on the board higher by £Bl5 a year. In his opinion, the board should not agree to the rate of interest without a definite protest. Beplying to Mr. Bloodworth, the chairman of the Finance Committee, Mr. J. B. Johnston, pointed out that Mr. Bloodworth had made no suggestions regarding the loan when he had been invited to do so during a committee discussion. "The facts must be realised," said Mr. Johnston. "This money must be paid in London to meet a loan raised 10 years ago. Mr. Bloodworth suggests that more strenuous efforts should be made to secure better terms. Apparently, he does not know what efforts were made. The company said, in effect, that it could not renew the loan at less than per cent. The board's bankers, under instructions, investigated the London market in an endeavour to secure better terms, and reported that the market was unfavourable. Later, the bankers advised the board that ! it could not possibly do better than these ' terms. Costs of notation. "It would have been a big order to have raised the £127,000 locally. Even if the money were available here at 5 5 per cent., the costs of flotation would have brought about more expense than is entailed by the renewal at new experience for the board s to pay 3 per cent, sinking fund." Mr. Johnston thought Mr. Bloodworth had been ill-advised to attack a private enterprise in public board. The company had a duty to its shareholders and its attitude was perfectly legitimate. Mr. M. H. Wynyard said it was necessary to understand that the board's bankers had not said money could not be raised in England at a lower rate. It was the costs of flotation which would make the burden heavier than in the case of renewal. The chairman of the board, Mr. G. "R. Hutchinson, said the board had authority for the action from the Government, which had recognised that the board could not do better. The position was that the loan was due next month and the board was finalising arrangements for the repayment of the amount. Circumstances were expected to be better within, the next seven years.