FORESTRY BONDS

New Zealand Herald, Volume LXXV, Issue 23033, 10 May 1938, Page 15

FORESTRY BONDS

Sir.—The comments of the chairman of N.Z. Perpetual Forests, Limited, Mr. W. Fraser, published in your columns on April 19, I feel call for some explanation from the viewpoint of holders of first-issue bonds throughout Australia and why the Federal Government has become active on their behalf. Tlje situation regarding each bond sold in Australia is as follows: —(1) The application was made in Australia in terms of the prospectus offering the bond; C2) the application was accepted in Australia; (8) the payment was made in Australia. Thus for each bond sold a contract was made in Australia. (4) Tn due course the bondholder received a certificate in accordance with the. terms of such contract, containing the following clause: —"That the company will at the option of the bondholder at any time after five years from the date of application for this bond (provided three months' notice is given to the company by the bondholder) redeem the bond on payment to the bondholder of the sum of twenty-five pounds (£25) with the addition of five per centum compound interest compounded yearly and calculated from the date of application on the respective amounts from time to time paid up on the said bond, and upon the such payment being made the bondholder will surrender this bond to the company at the Auckland or Sydney office of the company." In view of legal opinions existing relating to contracts of this nature there" is much legal thought as to whether the order of the Bondholder' Incorporation Commission in respect of these bondholders in Australia is not, therefore, ultra vires. The report of tho extraordinary -meeting of shareholders, held recently, regarding the compounding of the cpmpany's contracts with bondholders, now incorporated as shareholders in New Zealand Forest Products, Limited, has, however, fallen like a bomb on holders of first-issue debentures. According to tho report no provision is made for the redemption of AA and BB certificates, of which there were at the date of tho order 20,063 of a redeemable value of not less now than £4O each, representing over £.300,000. Mr. W. Fraser has now circulated a statement that "only a very few bondholders had repurchase or redemption rights" and deplores an agitation on their behalf sacrificing 60,000 bondholders in 'Australia, and perhaps 20,000 in New Zealand, "to secure a doubtful advantage for a select few." If that is so tho company's attitude about honouring the con-

tractual rights is most extraordinary. In a fresh report the company, after nllownnce is made for payment of approximately £1,000,000 under the compounding scheme, values its assets at £973,210. Surely the comparatively small slice necessary to cover the rights of just "a select few'-' would be little missed. Moreover, if the rights of this "select few" were honoured, then everybody would probably be happy. W. Mourns Smith. Collins Street, Melbourne.