LOAN INTEREST

New Zealand Herald, Volume LXX, Issue 21580, 26 August 1933, Page 12

LOAN INTEREST

BONDS HELD IN LONDON

SOUTHLAND POWER BOARD DEPUTATION TO MR. COATES ATTITUDE OF GOVERNMENT [by telegraph —OWN correspondent] WELLINGTON, Friday The members of the Southland Elec-tric-Power Board, accompanied by the member for Invercargill, Mr. J. Hargest, had a long interview with tho acting-Prime Minister, Mr. Coates, and Treasury officials this morning. Tho meeting took place in private and no statement was issued as to the outcome. It is understood that the deputation was informed that the view taken by the Government was that the board should pay its British bondholders in sterling, as it was considered New Zealand should honour her obligations to the full. Members of the board, it is believed, were not prepared to give any undertaking without fully considering the position. Tho meeting was accordingly adjourned and members of the board are considering the position. It is expected that they will answer Mr. Coates tomorrow morning.

Mr. Coates said he was not prepared to make any comment on the position at tho moment. There had been a full and frank discussion of the situation.

Earlier in the week the members of the Southland Electric-Power Board had an all-day sitting discussing th 6 question of interest payments to the board's London bondholders in all its aspects. They were assisted in their deliberations by a number of representative citizens from the country and town. Subsequently the chairman of the board, Mr. W. Hincliey, stated that the question of paying all future interest, commencing with the September payment, in New Zealand currency was determined upon. It had also been arranged for a deputation to wait upon Mr. Coates in Wellington.

COMMENT IN LONDON SURPRISE AT DECISION NEW ZEALAND CURRENCY PLAN (Received August 25, 7.25 p.m.) Times Cable , LONDON, Aug. 21 The City editor of the Times says the decision of the Southland ElectricPower Loard to pay future interest to London bondholders in New Zealand currency has surprised the City, where it is not unreasonably thought that the Government's action regarding tho Auckland tramway loans would eliminate further questions of the same sort.

The surprise was all the greater as the Auckland issue was complicated, some of the bonds originally having been sold in New Zealand, while the Southland issues were raised in London under the New Zealand Government's unconditional guarantee.

The Stock Exchange has ceased quoting the bonds pending developments, but it is confidently hoped that the Southland board's meeting with Mr. Coates will result in an assurance that the Government intends payment to be made in sterling, as it is assumed that Southland's declaration applies merely to payments as between, the board and the Government.

Nevertheless, it is highly desirable, in the interests of New Zealand credit, says the writer, that the position should be clarified immediately and steps taken to prevent a repetition of such incidents.

The Daily Telegraph's financial writer points out that the fiebentures were issued in London and carry the New Zealand Government's guarantee in respect of principal and interest. He says the Southland board's decision is even more glaring than that originally made in connection with the Auckland tramways loan. Persistence in it would be a short-sighted and costly blunder in view of the number of New Zealand local bodies' loans with early maturity. For the sake of New Zealand's credit, says the writer, it is to be hoped that the decision will be reversed after the interview with Mr. Coates.