A Debentureholder's Grievance.

Otago Witness, Issue 1797, 30 April 1886, Page 18

A Debentureholder's Grievance.

(From Truth, March 4.)

The New Zealand Agricultural Company is not a success, which probably is the fault of its inception. It was launched in 1879, but only some £125,000 of paid-up share capital was subscribed, while the company appears to have started with something like a million of debt in various forms of obligation. There was also the prospect that three-fourths of any profit would go to the vendors, who, however, subsequently returned a part of their consideration in the form of shares (which were cancelled), debentures, and cash, and agreed that dividends on the shares they retained — still over two-thirds of the then paid-up capital — should be deferred. By the aid of these concessions, dividends of 7 per cent, were paid up to the end of 1884, but this state of bliss then came to an end. In 1884 the expenditure (inclusive of debenture interest) exceeded the income by £37,315. This sum was carried to suspense account, £1(50,000 having been placed to the credit of that account by the vendors to provide for deficits of revenue. Last June the company found itself unable ro redeem its debentures approaching maturity, and the debentureholders appear to have since agreed to postpone the date of maturity of their securities to June 30, 1890. A correspondent who is both a share and debenture holder in the concern argues with some force that the debentureholders showed more generosify than prudence in granting this delay. By winding yip last summer they might have received nearly, if not quite all, their outlay, even taking the 161,272 acres of land at only £2 per acre, as thei'e was an uncalled capital of £198,565 to fall back upon. That capital has now been called up, and as the interest on the debentures until 1890 alone will absorb £168,000, the prospects of a successful winding up of the company in 1890 appear to be far from promising, unless the company were to earn large profits or the value of the estates were to greatly improve — which seems exceedingly doubtful, to judge from last year's experience. The " suspense account," which showed £43,880 to the good at the end of 1884, and the reserve fund (£3000) have disappeared, while a further loss of £20,097 appears in the profit and loss account. The financial position of the company, it will be seen, then, is truly deplorable. By-the-way, to show what difficulties the company has to contend wjth, the loss on the " rabbit" account is no less than £4223 for 1885, this being the cost io the company for destroying these interesting and prolific animals during the year aflcr deducting the proceeds of skins 'sold. The cost of management, also, entirely out of keeping with the circumstances. Why the expenses in London alone — thousands of miles away from the property — should amount to £3859 lamat a loss to understand. Fees of £250 a year to the directors— i.e., over £10 a-piece for each sitting, if they meet twice a month— are certainly altogether out of the question. In fact, considering the disastrous result of their management, the least they could do would be to forego their fees. The best thing that could happen for all concerned, excepting perhaps the directors, would be to wind up this unfortunate undertaking. By-the-way, my correspondent, when subscribing for shares and debentures, did so on the faith of a special agreement — viz., that the debentures should be received by the company in satisfaction, pro rata, of any future calls that might be made on the shares. This agreement was made by letter, on behalf of the directors, addressed to him by the secretary. When, however, my correspondent tendered his debentures, on the unpaid capital being called up, the directors declined to accept them in payment of calls, on the ground of legal advice, the undertaking to do so— which was fully admitted— -not having been registered at the Joint Stock Companies' office. This seems to me rather sharp practice.