PAYMENTS ON LONDON LOANS

Otago Daily Times, Issue 21984, 20 June 1933, Page 8

PAYMENTS ON LONDON LOANS

TO THE EDITOR. Sir, —I suppose that, expressed in a layman’s way, the Southland Electric Power Board, in submitting certain questions to the King’s Bench Division, is really asking the court to interpret its contract with the London lenders. It appears that the lenders have the option of asking for payments of interest and principal to be made in New Zealand or London. If they ask for payment in New Zealand the lenders get a New Zealand pound note. Apparently, what the board wants to know ig this, If the lenders ask for payment in Loudon are they to get a New Zealand pound note? From what has been published in the Invercargill papers it appears that the board has made an offer to the London lenders along these lines: —“The board will guarantee to pay you in sterling, and will give you an extension of the period of the loan, and you will get a Government guarantee covering both interest and principal. Will you reduce your interest below 6 per cent, at £96, at which it stands at present, and which is near enough to 6J per cent? ” Apparently the reply from London was equivalent to saying “ Nothing doing.” So the board ig no doubt feeling that London can be a little bit too greedy. It may be, Mr Editor, that you are right in commenting so strongly upon the Southland Power Board’s moral obligations, but the local authorities of New Zealand have been given a very good lead by the Parliament of New Zealand. Moral obligations have disappeared from the powers given by Parliament to local bodies by the interest reduction legislation — legislation which is far more likely to disturb New Zealand’s reputation in London than anything that the Southland Power Board can do by way of having its legal position clarified. Under this legislation, where debentures give the holder an option of payment either in London or in New Zealand if the last payment of interest prior to January I, 1933, was made in New Zealand, then the bondholders are caught in the net and are subject to the 20 per cent, reduction in interest, and are also subject to the conversion provisions of the Act, and if they decline to convert they are compelled to accept 33 l-3rd reduction in interest. If you wish to know what London thinks of that, please refer to youx cablegrams dated London, May 24. iet the article written by you in your issue of Friday last suggests that the step taken by the Southland Power Board in seeking a ruling from the King s Bench Division may be most damaging to the reputation of the Dominion, and may react upon the credit of all local B ov ern ing bodies in the Dominion, and greatly prejudice their prospects on the London money market. The question is whether the legislation has not already done the very damage to which you refer. T e whole posjtion is that, as was recent y stated in the cablegrams to be the feeling of the conservative financiers the character of the times and the need for drastic measures ought to condone a lapse from the strict letter of governmental financial rectitude.—l am, etc.. An Admirer of the O.D.i.