BREWERY DEBENTURES.

Otago Daily Times, Issue 18895, 22 June 1923, Page 2

BREWERY DEBENTURES.

( TO THE EDITOR Sir, — A close perusal of the prospectus of the New : Zealand Breweries (Ltd.), to which the investing public is now being asked to subscribe, leaves one with the feeling that the brewers recognise the grave danger ahead and, as self-preservation runs strong in human nature, are endeavouring io shift the probable loss on to the shoulders of the public, and in the process place themselves “on velvet.” • - What other class of trader would have had the. temerity to issue* debenture stock to almost the full ..value, -of., their [assets other than goodwill? Yet here we,, have an issue of ±11,000,000 of debentures against assets said by the vendors to be worth to-day as going concerns £1,103,000. Such a transaction almost amounts to a sale to the debenture holders of the assets at full valuation for the simple reason that there is practically' no margin of security in the event of trouble. Supposing prohibition is carried at next poll, what will then be the value of these assets—buildings built for a special purpose, the carrying on of which is prohibited, and special machinery and plant, the bulk of which must remain idle? Certainly nothing like the above valuation, and with that event in view investors Would do well to recognise that they may have to face a possible heavy loss, —anything up to 50 per cent, of their investment. .

With a. debenture issue so closely approximating'assets there should have been, in the interests of the investing public who are taking a considerable risk, some provision for a substantial yearly sinking fund out* of the profits of the next throe years, which is' the present limit of the trade’s lease of life, and at the same time there should have been during'the same period a limit placed on the dividend to be paid on the ordinary shares. These are being issued for supposed goodwill, and the bulk of them are at present being retained by the brewers. If the vendors had been anxious to show their faith in tho future of the business there would have been’ some provision ’ bindirig them to-hold a reasonable number of their goodwill shares for a fixed period, but.l see nothing of this nature in the • prospectus. As a rule, in one’s mind debentures are associated, with “security,” hut in this case, to my thinking, they amount to a gamble, and only investors who are prepared to face a loss should touch them.—l am, etc.; ■ ■; Investor.