LOAN CONVERSION

Otago Daily Times, Issue 22612, 2 July 1935, Page 9

LOAN CONVERSION

THE NEW ZEALAND ISSUE QUICKLY OVERSUBSCRIBED (United Press Association). (By Electric Telegraph—Copyright) LONDON, July 1. (Received July 1, at 11.45 p.m.) The New Zealand loan was over-sub-scribed, the cash lists being open for only half an hour. FINANCIAL NEWS COMMENT LONDON, June 30. The New Zealand conversion is not attractive to the “ stags ” (speculators), and the Financial News considers that the terms recommended to New Zealand suggest that the .authorities are not over-sure of the market. . Gilt-edged securities in general continue to hang fire. On the other hand, the new issue market is celebrating the half-year in a blaze oc activity, which is developing into an unhealthy boom. The Investors’ Chronicle considers that investors are losing their heads and money. The fact that a few goods names figure in prospectuses seems sufficient for a voracious public. The year .1928-29 showed how new issue booms can lead not only to individual losses, but to losses to industry in general. It concludes: “We do not suggest that the present movement has reached boom proportions, but the first signs of it necessitate a warning of the risks ahead.” COMMENT BY MR HAMILTON THE TRANSACTION EXPLAINED (Pee Untjed Press Association) WELLINGTON, July 1. The Acting Minister of Finance, Mr A. Hamilton, interviewed to-day in regard to the cabled report of the London loan conversion, stated that the transaction relates to £10,135,800 5 per cent, stock, £5,000,000 of which was issued in 1922 and £5,135,800 in 1929, the latter representing the conversion of portion of the f 29,000,000 loan which matured for payment that year. In regard to the conversion now being effected the Minister said the final maturity date of the £10,135,800 would not have occurred until 1945, but the Government had the option of paying off the loan on or after July 1, 1935, on giving three months’ notice. In conformity with the Government’s policy of seeking every avenue. whereby interest rates might be reduced to pres-ent-day standards, thus affording considerable relief to the finances of the Dominion, a favourable opportunity to effect conversion had been taken in respect of the loan in question. Mr Hamilton stated that the new issue, which was being made at 98J with interest at 3 per cent., would have a 20-year currency, namely, to July 1, 1955. . The Government, however, would retain its option to redeem within three years of that date. The. Minister explained the desirability of retaining the option to redeem within a period prior to the stated maturity date in that advantage would be taken, as in the present case, of a favourable opportunity to refinance on easier terms. Of the total loan of £10,135,800 the New Zealand. Government was paying off the holders to the extent of £2,135.800. Thus the new issue would be £8,000,000 net, and having regard to this factor and the low rate of interest now payable, the annual saying to New Zealand would be considerable.