DEBT CONVERSION

Otago Daily Times, Issue 21906, 18 March 1933, Page 12

DEBT CONVERSION

APPLICATIONS POURING IN OFFERS EXCEED £85,000,000 TREASURY WORKING AT HIGH PRESSURE I (Special to Daily Times.) WELLINGTON, March 17. Although seven days still remain before the applications close, by to-night the Government had been offered for conversion over 74 per cent, of the whole internal debt. The total this morning was £84,435,922, and during the day stock covering a further £750,000 was received, bringing the grand total well over the £85,000,000 mark. Considering that the majority of the applications now being received are from small investors, each covering only a few thousand pounds' at the most, it will be understood in what a vast amount of work the Treasury is involved to reach a 24-hourly total of between £2,000;000 and £3,000,000.' The incoming mail which is being delivered constantly throughout the day and evening has reached huge proportions, and the special accounting staff which has been engaged for the work is busy until very late each night. Letters received by the Treasury dur-

ing the last few days have shown . a lack of understanding on the part of I many bondholders as to why the Government should have found it necessary to undertake' such a huge scheme of conversion when in their opinion much the same effects could have been achieved simply by increasing the stamp duty on interest to 20 per cent. An official statement issued to-night emphasises that without the conversion operation the Government’s main object—the stabilisation of interest rates at -the new low level of 4 per cent. —could never have bean gained, A straight-out interest cut, it is stated, would never have the same salutary effect on the level of the existing rates as conversion is expected to have. The experience of a previous imposition of stamp duty, in fact, was that it did nothing towards inducing a general reduction of interest rates, but tended rather to increase them. The rate payable on gilt-edged Government securities has always been the standard rate of interest in New Zealand, and when under the terms of conversion these gilt-edged securities are reduced to a basis of 4 per cent, and 31 per cent, the Govern- : ment confidently expects that the reduc- . tion will be felt over the whole field of investment and will introduce a new era of cheap money in New Zealand. An incidental feature of conversion, the statement continues, is that it enables the Government to space the maturity dates over a period of years, and thereby ensures that portions of the debt falling due at different intervals will be manageable. In other words, it removes any likelihood of. the Government being embarrassed in future by having to redeem huge amounts of loan on a single date. In this respect the New Zealand Government is merely following the example set in Great Britain last year when a converted war loan of two billion, pounds was made redeemable over a period of years. “Many bondholders who have been unable to take advantage of the offer of free advice made by stockbrokers, bankers and officials, of the Post Office have reported great difficulty in filling in their application forms and describing their stock or debentures. The Treasury wishes it made known that any holder in this position need, only sign the conversion form, fill in his full name and address, and post it with the relative documents and the Treasury will do the rest.