SOUTHLAND POWER BOARD TO PAY INTEREST IN NEW ZEALAND CURRENCY

Stratford Evening Post, Volume II, Issue 356, 13 September 1933, Page 3

SOUTHLAND POWER BOARD TO PAY INTEREST IN NEW ZEALAND CURRENCY

DECISION REACHED AT PROTRACTED MEETING

Press Association —Copyright,

Invercargill, Sept. 12

By eleven votes to one the Southland Electric Power Board at a meeting today decided to rescind its former resolution to pay interest on its London loans in sterling and later carried a motion to the effect that it would pay in New Zealand currency but would facilitate a test case regarding the matter if the bond-holders desired a ruling. The question of interest payments was the main topic for discussion at the meeting, which was a protracted one, and several of the issues were considered in committee. A majority of the members agreed that the board was under no legal obligation to pay in sterling and that if there had been a moral obligation to pay this had been nullified by the action of the bond-holders in England in refusing to accept a lower interest rate as practically all other bondholders had done. It was stated during the discussion that the board’s decision would mean a saving of £20,621 to the users of electric power in Southland. Mr. W. McChesney moved "That seeing the contract between the London debenture-holders and the board gave the option of paying interest instalments in New Zealand currency, and that Mr. Coates advised the board to take steps to apply for a test case in London with a view to enabling the board to pay interest in New Zealand currency, and after having received the opinion of Sir Gerald Hurst, K.C., London, supported by the opinion of the board’s solicitor, Mr. William Macalister, that the contract between the London debenture-holders and the board enabled the board to pay interest in New Zealand currency, and as the result of the Government refusing the board the advantage of temporary financial arrangements in London (which was assured) and thereby saving exchange amounting to £20,000 per annum, the resolution of the board carried at a special meeting on August 4 agreeing to pay the September instalment of interest in sterling be rescinded.”

“In asking the board to rescind the motion carried on August 4,” said Mr. McChesney, “I think it will ‘ be agreed 'that if the motion is rescinded it will be one of the most momentous decisions arrived at by the board since its inception. If it is not rescinded the board will have to find £20,625 as exchange on its interest payments. In the meantime provision is made for the payment of interest instalments in New Zealand currency; that is not disputed; it is the legal position. The board has had legal advice on the matter from Sir Gerald Hurst, and his opinion is that the board has a good case and should succeed. Furthermore, when the board first considered the matter Mr. Coates advised the board to have a test case.” The chairman (Mr. W. Hinchey): I don’t think you should say Mr. Coates advised the board to have a test case. Mr. Coates raised that point when we were at Wellington and said that he had not advised a test case. He had merely suggested one. Mr. McChesney said the action of the board if it decided to rescind the resolution would probably be called default in some quarters, but in his opinion it was not default. It was stated, he said, that Mr. Forbes gave a pledge that the board would make this payment in sterling. If he did so let thfe Government malm up the difference. The board’s trouble was caused by the Government raising the exchange rate, so the Government was responsible for the deficiency. Mr. Coates had said New Zealand’s credit would be damaged. If it was necessary for the Southland Power Board to pay £20,000 as exchange to maintain the credit of the Dominion it was not the duty of the people of Southland to make the payment; it was the duty of the country. The motion was seconded by Mr. J. T. Carswell, who said: “If we pay in New Zealand currency we have fulfilled our contract. We have only got to consider legal obligations, and there is no room for sympathy for the bond-holders, who can only receive the exchange at the expense of the people of Southland.” Mr. A. A. Mac Gibbon, who was the only one to oppose the motion, expressed the opinion that Sir Gerald Hurst had never said they could pay in New Zealand currency. He had asked for a test case. As to asking the debenture-hold-ers to take action, that was cowardly. He objected to trying to “beat” them. Mr. E. K. Sim said he would be sorry to embarrass the Government, but interest rates had to be brought down. The board had tried to get a reduction but could not, and in his opinion the only thing they could do was to take action along the lines proposed in the motion.

Mr. Hinchey said the matter was a very serious one, but he knew the members of the board had considered both sides of the question. It was the wish of the Government that the board should pay in sterling. The reason for that was mainly that the Government and local body debt in London was very large and the Government feared that the action of the board if it paid in New Zealand currency might seriously affect the credit of the Government and other local bodies. There was a lot of feeling about the matter up and down the country and many people would like to see the board carry the motion. That attitude was mainly due to objection to the increased exchange. The Government should have taken steps to have interest reduced, but it had not-done so. If interest had been reduced the board would not have been troubled.

After the motion had been carried the following motion was adopted without dissent: “The board having been advised that as the matter of low interest is payable in New Zealand currency, resolves to make the payment in New Zealand currency with the intimation to the de-benture-holders that the board is willing to facilitate a ruling being obtained later if they so wish.”