DOMINION LOANS

New Zealand Herald, Volume LXX, Issue 21540, 11 July 1933, Page 10

DOMINION LOANS

LOCAL BODY ISSUES INTEREST IN LONDON EXEMPTION FROM REDUCTION AMENDING LEGISLATION [BY TF.LKGKATH —PRESS ASSOCIATION"] "WELLINGTON. Monday The Minister of Finance, Rt. Hon. J. (jr. Coates, announced to-day that since his last statement lie had been in touch •" with tho Prime Minister, IH. Hon. G. W. Forbes, in London, in regard to certain aspects of tho recent legisla- ■ tion affecting local body securities. "1 refer," stated Mr. Coates, "to securities having London or New Zealand as tho optional place of payment of principal and interest. Legislation passed last session provided, inter alia, that whore the last payment of interest made not later than January 1, 1933, was mado in New Zealand tho reduc- ' tion of 20 per cent in interest effected by part X. of tho Local Authorities In-

terest Reduction and Loans Conversion ' Act, 1932-33, should apply. Certain of these optional domicile securities havo

found their way to London from time to time and tho result has been that the London investor who purchased tho securities in good faith has found that tho reduction in interest is applicable to such securities. "This has caused a degrco of unccr-

tainty on tho London market. It was, and is, tho intention of tho Government that the reduction of 20 per cent in interest shall apply to New Zealand nationals only and while it is desired to prevent the exporting for salo of these securities having London or New Zealand as the optional place of pay-

ment it is not desired to penaliso in any way the overseas investor. Therefore, the Government has agreed to introduce amending legislation during the next session of Parliament to exempt from the reduction of tho 20 per cent referred to all optional domicile securities sold in London not later than July 1, 1933. Auckland Tramway Loan

"I may say," continued Sir. Coates, "that this is on the distinct under-

standing that should any interest couc pons be subsequently cashed in Now Zealand, the 20 per cent reduction shall • apply in respect of such coupons and - the original rate of interest shall be < resumed should the securities m question again revert to London ns the place of payment of interest. Further- ' more, the option already given m the " securities will not bo interfered with. ! To facilitate arrangements, the London ' Stock Exchange has agreed not to deal • after July 1, 1933, in any reduced " securities that have not been exempted • under tho terms of tho proposed legislation. „ . "I should also like to refer again, - stated the Minister, "to the decision - of the English Court of Appeal in the Broken Hill case. I recently made a - statement in regard to the decision of v the Auckland Transport Board to pay - interest on July 1 on a tramway loan I in New Zealand currency. Tho legal , position in this connection has already been given full publicity and the legal , adviser to the Auckland Transport

Board has expressed the opinion that in view of the ruling in the Broken Hill case, the board had no option but to pay interest on the -debentures in question in New Zealand currency instead of in sterling, as had been the practice prior to the decision in the Broken Hill case. Validating Sterling Payments "I wish again to state that the attitude of the Government is that if there is not a legal obligation there is a moral obligation on every local body which has issued debentures in exchange for moneys received in London pursuant to the terms of, a London prospectus to meet its obligations in London in sterling. If such payments in sterling contravene legal decision's tho Government will introduce legislation validating payments in London in sterling. If necessary tho Government will also validato payments in London in sterling where this practice has clearly indicated the right of the holder to bo paid in sterling and the intention of the local bodies to pay in sterling in London. "I may say," concluded Mr. Coates, "that the Government is determined to maintain the reputation which tho Dominion has hitherto enjoyed for fair and honourable - dealings and an announcement in terms of tho foregoing is being made iri London to-day by the Prime Minister."