BRITISH FINANCE.

New Zealand Herald, Volume LXIX, Issue 21136, 19 March 1932, Page 11

BRITISH FINANCE.

CONVERSION PROPOSAL. BIGGER SCHEME CONTEMPLATED. British Wireless. RTTGEY. March 17. Under the Bank of England's offer of conversion to holders of £116,467,382 of per cent. Treasury bonds, which fall due for repayment on April 15 next, Iho holders may take for each £IOO of their j holdings £97 12s 6d of a 4£ per cent, conversion loan to be redeemable between 1940 and 1944, or £lO7 of a per cent, consolidated loan repayable after 1957. While the choico is given to exchange into securities, those holders who prefer to do so may have the right to be paid off in cash. It. is understood' that at least 90 per fcent. of the bonds are held bv Government department's, and the, public in concequenco is concerned only to a small extent. The terms of the conversion offered arc virtually equal for both stocks. The present step is regarded by the N Press as indicating the confidence of the Treasury' in the improving status of British credit. Moreover, it creates a market for the much more ambitions project of converting .£2.000,000,000 worth t>f 5 per cent, war loan stock, which is in contemplation. The conversion scheme to which reference, is made was outlined by the Chancellor of the. Exchequer in his financial statement of September 10, and given effect by the succeeding Finance Bill- It concerns 5 per cent, war loan to the amount of £2.086.977,000. The Treasury has, since 1929, had (lie right to pay off this loan at any time, on giving holders three months' notice. The legislation "devised conditions for a conversion by holders who elected to take lluit com so instead of accepting cash. Mr. Snowden explained that the Government desired powers to launch a conversion scheme at the first' favourable moment. No departure from the,terms 4 of the original prospectus was contemplated. Three months notice would be given during which offers to convert would be received. The reason for prolonging the operation in this way wa s that the size of the loan would mak» it essential for any Government to test how much they might have to find for repayment in cash. He explained that, those who converted would retain then original security under changed conditions as to interest,'and that, if «o reply was received to an offer to convert the holder i would be takeu to have accented. This ■ was the course followed by Mr. Goschen in his la re a conversion operation (in 1888). ■ . Commenting on the scheme at the time *he itv Editor of the Times wrote:— •"The idea of dealing with the war loan as a. whole is quite sound. If the Budget 5s balanced, expenditure gradually reduced, and trade, restored, a genuine voluntary conversion operation can be carried out /Successful Iv. Such an operation woulu add prestige, to British credit, but an involuntary conversion operation, however camouflaged, would injure rather than enJianre it. . . . When the time comes ( holders of war loan who do not, wish to ] convert, will have so to inform the tFreasurv in writing. Of course the \as majority will convert their stock, and no ( hardship would be felt by the minority ( "who for particular reasons might elect to take repayment in cash."