THE N. Z. I. AND M. A. COS SUSPENSION.

Otago Witness, Issue 2055, 13 July 1893, Page 17

THE N. Z. I. AND M. A. COS SUSPENSION.

The news that the New Zealand Loan and Mercantile Agency Company had suspended payment, pending reconstruction, came as a great shock to the people .of this colony yesterday. Although the company deemed it prudent to pass its half-yearly dividend a few days^since, there were probably few . people in the colony ' who imagined that step was but the precursor of an almost immediate suspension. Not does an examination of the company's latest report and ( balance sheet disclose anything that would indicate there was the^ remotest .prospect of such a crisis in the affairs of the company taking place. On the contrary, indeed, the report in question was of a distinctly reassuring "character. It is true that while a dividend y of 10 per cent, per annum was recommended and provision made for the payment of interest on capital paid in advance on the sixth issue of shares, no addition was made to the reserve fund. The reason for this, as given in' the report, was that while the company was not concerned in the speculation in town and suburban properties which at that time had resulted in the financial difficulties of certain institutions of Melbourne and Sydney, yet "the distrust thereby caused and the lower prices obtainable for wool and cereals have determined the directors to make larger provision than usual for possible contingencies." They therefore proposed "to make no addition to the reserve fund, which stood at £330,000. ' The action of the directors was not only prudent, but had an assuring . tendency. But the report contained a further clause, which must have quite dispelled any suspicion of danger to the company. It had reference to the conversion and consolidation of its outstanding debentures, and with respect to this the directors made the following satisfactory •. announcement : — " During the last six months the directors formulated a scheme for the issue of £550,000 4 per '. cent, debenture stock and for the . conversion and consolidation of the various outstanding debentures and debenture stock of the company into one uniform 4 per cent, debenture stock. Although this operation was carried out only during the closing months of the year 1892, not ' only was the above issue' of debenture capital successfully accomplished, but • the scheme of conversion has since been largely adopted and is proceeding satisfactorily. This conversion is a highly important episode in the history of the company, and as it progresses it will not only strengthen the position of the company but conduce to greater economy in its administration." In the face of all this it was difficult to realise yesterday that the company had found it necessary to close its doors with a view to reconstruction. It is evident that to its, Australian business — of vast proportions, and rendered difficult to provide for by the widespread financial disasters whose effects are hanging like a pall over Victoria and New South Wales — must be ascribed the reason for the trouble which has ■ overtaken this great institution. Indeed the .terms of the cable message conveying the notice of the suspension seem to indicate that the direct and immediate Cause is the inability of the company to secure the banking accommodation necessary' for the carrying on of its immense Australian business. It is satisfactory to know that the New Zealand business of the company is in- no way responsible for its troubles, and that while the keenest regret must be experienced by our colonists that an institution^ which had its, origin in their public spirit and enterprise has fallen a victim to the disastrous Australian collapse, no prejudicial effect on our other financial institutions need be apprehended. In this connection the authoritative announcement made on behalf of the Bank of New Zealand will be read with unfeigned pleasure. At one time the two institutions- were closely allied in their business", transactions, and it is a. most fortunate thing that they are now so little dependent 'on each other's finance. . We need but express the-, hope that the process of reconstruction in the case of the Loan and Mercantile will proceed 'satisfactorily and expeditiously. This 'must, of. course, rest largely with debenture T holders. The directors have before them a task which will require all their skill and prudence. That means may be found to quickly re-establish the concern on a sound basis, and withal press as fairly as possible on debenture-holders and shareholders, must be the earnest wish of all who desire to see the Loan and' Mercantile surmount its troubles I

and re-enter on a career of stability and prosperity.