LOAN CONVERSION

New Zealand Herald, Volume LXX, Issue 21561, 4 August 1933, Page 11

LOAN CONVERSION

TRANSPORT BOAKD PLAN CITY COUNCIL'S ATTITUDE QUESTION OF OBLIGATIONS A report by the town clerk, Mr. J. S. Brigham, and the city treasurer, Mr. A. Messer, regarding tho consolidation and conversion of tramway loans was placed before the City Council last evening by the Finance Committee. The total indebtedness of the Auckland Transport Board at March 31, 1933, was £2,324,300, according to the report. Tho council was concerned in and retained responsibility for £1,853,000, which was the loan indebt-' edness incurred by the council in respect of tho tramways undertaking until it was handed over to the board. Of this sum. £398,4P0 was domiciled in New Zealand, and the board proposed to incorporate £321,400 in its general conversion scheme, that amount consisting of £293,400 due on .July 1, 1940, and £28,000 due on November 1, 1§53. Under the conversion scheme the maturity date in respect of both loan items was altered to March 31, 1953. The board intended to seek the necessary legislation for conversion and as long as the position of the council as to its continued liability was clearly defined it'was recommended that tho board's proposals be accepted. However, if the council had to continue to bear its obligations to the original* bondholders, it would bo preferable to allow the loan items to remain unaltered. Although the council was financially protected by legislation, it was in the council's interest to pay tho original tramways loans as early as possible. It was proposed to defer payment of the £293,400 loan for some 13 years, "but it was already at the minimum interest rate of 4i per cent. It was not thought, therefore, that conversion was warranted and it was in tho interest of both the council and the board to have loans on which there was a dual obligation paid as soon as possible. However, if tho council decided to assent to tho board's proposals, it was recommended that a loan item of £77,000, assumed by the board in 1928, might well bo incorporated in the conversion scheme. Tho inclusion of this loan, which normally matured in 1959, would bring the whole sum domiciled in New Zealand and in which the council was concerned within the scope of the conversion' scheme.

Tho report was received. On the recommendation of the Financo Committee, it was decided to inform the Transport Board that on condition the council was wholly released from its obligation with the debentureholders the council had no objection to tho proposals.