THE SOUTHLAND POWER LOAN.

Otago Daily Times, Issue 18340, 2 September 1921, Page 7

THE SOUTHLAND POWER LOAN.

TO TUB EOITOH. Sib, —The Press Association telegram from [nvercargill published in this morning's Daily Times on the subject of the loan recently arranged in London for the Southland Power Board, .-while no doubt correct so far as it goes, does riot tell the whole story. It is' true that a 6 psr cent, loan yielding' £9G per cent, and costing 3 per cent, for the incidental charges of underwriting represents slightly less than 6& per cent, in interest (£6 9s per cent, to be precise). Still, there is to bo added to this rate the cost of redemption at the maturity of the loan. Tha actual cost of this redemption, of course, varies with the term of the loan. If the term is a ehort one, the redemption cost i 3 relatively high. On a loan for 15 years it raises tho r.ctual interest charge from £6 9s to £6 15b 2d. If for a 20-years term, the actual rate is £6 12s lid; while for a 30years loan it is £6 10s 7d. 'Then, again, the loan carries a Government guarantee, and one of the statutory provisions attaching to such guarantee" is that the whole loan must be redeemed at dole of maturity by means of a sinking fund. TLcre, again, the actual cost varies with tho term of the loan. We are not told what the term of the Southland loan is, but, as'suming it to be 20 years, then the sinking fund required is a further sum of £3 2s per cent., bringing the- yearly charges for a loan raised on the terms namsd and lor 20 voars to 9.84 per cent., or within measurable distance •of 10 per cent. That is a rather stiff, charge for an undeveloped undertaking such as the Southland power venture to pay, and it is evident ihat during its initial stages it can scarcely hr.'pc to make ends meet.—l am, Mc., August 30. „ X.