AUSTRALIAN LOAN

New Zealand Times, Volume LII, Issue 12194, 20 July 1925, Page 7

AUSTRALIAN LOAN

FIVE MILLIONS FOR LONDON FIFTEEN MILLIONS IN NEW YORK TERMS ANNOUNCED^** By Telegraph.—Press Assn. —Copyright. Australian and N.Z. Cable Association. NEW YORK, July 17. The Morgan Company has announced the purohase of 75 million dollars’ worth of gold bonds from the Commonwealth of Australia. They are 30-year 5 per cent, bonds, and will he offered publicly on July 20th. Simultaneously an offer of £5,000,000 of Australian Government bonds will be made on the London market. It is reported In banking circles hero that the proposed Australian loan will be n Bank of England loan in ita entirety. The bank will supervise the issue, while the Morgan Company will have charge of the part sold in tho United States. It is expected that the British portion will be sold on a 4.9 per cent, basis, and the American on a 0.15 per cent, basis. The loan will be sold at 994. The delay in the announcement of the flotation is reported to be due to Australians being not entirely agreed as to the amount they wish to borrow; and also the arrangement through the Bank of England may have made the negotiations a little more complicated. . LONDON, July 17. The Commonwealth £5,000,000 loan, at 99|, with a £1 bonus with the first interest, is being underwritten to-day. Fifteen millions are being simultaneously issued in New York. PRIME SECURITY AUSTRALIA’S GOOD CREDIT ISSUE WILL BE POPULAR. Australian and N.Z. Cable Association. (Received July 19, 5.5 p.m.) NEW YORK, July 17. The “New York Times” financial editor, commenting on the announcement of the Australian loan, says: “Hie 5 per cent, rate obtained may be considered a tribute to the credit and standing of the Commonwealth. It is the first time a foreign loan has been floated in New York at so low a rate of interest since, the war. Bahkera place the Australian issue in the same category with Canadian bonds, which are regarded as prime securities here. The loan is another evidence of no-opera-tion between Amerioan and British financial interests to maintain stable conditions, following on the resumption of the gold standard in Britain, and it is expeoted to be followed by other British colonial borrowings hero, now that the way has been opened.” The. “Times” emphasises the commanding position the United States has attained as a creditor nation since the war. A number of important banking houses in New York, and a small group throughout the country, will be associated with the Morgan Company in the Australian offering., The “Herald-Tribune” says a feature Which is expected to make the, Australian bond issue popular with investors is that they are not redeemable in less than 25 years. LONDON’S LENDING POWER EFFECT OF GOLD STANDARD CRITICS SHARPLY DIVIDED. , Australian and N.Z. Cable Association. (Received July 19, 5.6 p.m.) _ LONDON, July 18. The Commonwealth ’ s departure fremits loan policy, in going to New York for three-quarters of its present loan requirements, has occupied a conspicuous place in all financial commentators’ writings, both in the daily papers, and in the more considered judgments of the weekly financial reviews. The London portion of the loan was well received, and will meet a gilt-edged market, which has steadily improved in the past three weeks under the influence of the Bank of England gold position, and the strong bank returns. Now that the Commonwealth arrangements have taken a definite shape, the reasons and influences which brought aoout the decision partially to forsake the London market form the basis of innumerable newspaper articles upon London’s general position as lender to the Dominions and the Colonies. The tone of financial writers’ oomments upon this subject seems everywhere to vary in accordance with their views upon the wisdom or otherwise of the recent return to the gold standard. HAS AUSTRALIA BORROWED TOO MUCH? Tho “Nation,” for instance, says: “The Financial Press does not seem quite clear as to its attitude toward the Commonwealth’s decision to go -to New York. On the one side it is argued that we have dangerously overlent, bad trade and over-high consumption having reduced our capacity to lend abroad.” The “Statist,” on the other hand, says: “It is urged that only by lending abroad can our trade be improved. There are many factors tending to check over-lending, Wit the effect of the Trustee Acts has been to enable Colonial Governments, whatever their financial records or capacity, to raise money on almost as good terms as Britain. For our part it seems more important to know whether Australia has been over-borrowing than whether [we have been over-lending.” Other writers emphasise that the return to the gold! standard was decided upon with the Dominions’ concurrence and support, and it was probably recognised at the time that it would necessarily entaij limiting London’s external lending. A CHECK IN LENDING The “Statist” welcomes, as a virtue of the gold standard, the fact that it has given a clear indication of how far the country is capable of lending abroad. To the argument that the embargo on foreign investments and the necessity for the Commonwealth to go to New York, proves that the gold! standard has been inimical to the country, the “Statist” replies that the country cannot lend more than it saves, that Britain at present is barely making ends meet, and that consequently the gold standard’s automatio check to over-lending should he welcomed. LOAN ARRANGED IN LONDON (Received July 19. 11.5 p.m.) LONDON, July 19. The underwriting of the Commonwealth loan is completed, and the prospectus will be ad-

vertised on Monday. The list closes on the 22nd. The last instalment is payable on October 4th. A full half-year’s interest will be paid on January Ist. Though three-quarters of the total loan will be issued in New York, city circles here are relieved to learn that the whole transaction was arranged through London. It is anticipated that in accordance with precedent the New York portion will eventually be absorbed in London.