DISAPPOINTING RESULTS

Otago Daily Times, Issue 23224, 23 June 1937, Page 10

DISAPPOINTING RESULTS

AUSTRALIAN LOAN

UNSETTLED STATE OF MARKET (United Press Association) (By Electric Telegraph—Copyright) LONDON, June 21. The disappointing result of the Australian loan, which opened at 10s discount and 53 per cent of which, it is believed, has been left with the underwriters is not surprising in view of the unsettled state of the gift-edged market. The financial writer for the Australian Associated Press points out that the bulk of the original loan passed into the hands of the shortterm market, which meant that the conversion issue had to attract fresh applicants, which is most difficult at the moment. CONVERSION LOAN FIFTEEN YEAR ISSUE The conversion loan in London of £12,360,959 (stated the Sydney Morning Herald recently) is to provide for a Commonwealth loan of like amount, which was raised in October. 1932. and which was the first of a long series of conversion loans negotiated bv Mr S. M. Bruce. It was for a New South Wales issue bearing interest at 5? per cent.

The present loan is a Commonwealth issue, as was its predecessor, and to the lender the Commonwealth is responsible for interest and due repayment of principal. The Commonwealth looks to New South Wales for reimbursement On the terms stated, namely, a maturity of 15 years, with the option of repayment at the end of 13 years, with interest at 3£ per cent., and an issue price of £96 10s, the return to the investor is ,£3 16s 2d per cent, on the longer term, and £3 16s lOd per cent on the shorter term.

The loan which it is proposed to convert was issued at £97 10s at 3J per cent., with a currency of five years, and optional redemption at the end of four years. The yield on the longer term is £4 Is 2d per cent. The difference between £4 Is 2d and £3 16s 2d represents approximately the saving per cent, to the Commonwealth, and so to the State, in interest There would also be the saving in exchange. Though the discount now offered is £1 more than that of five years ago. the fact that the maturity is 10 years longer accounts for the proposed issue beinT more favourable to the Commonwealth than its Dredecessor.