A NEW LOAN,

Taranaki Daily News, 18 September 1924, Page 4

A NEW LOAN,

AMOUNT EXCEEDS A MILLION. OFFER FROM BANK OF N.Z INTEREST PER CENT.AN IMPORTANT DEPARTURE. By Telegraph.—Press Association. Wellington, IM Night. When the House met .this evening the Prime Minister made a statement on the subject of a proposed loan from the Bank of New Zealand as a means of strengthening the finances of the State Advances Department. Mr. Massey said:— N desire to inform hon. members that the Government has received from the Bank of New Zealand an offer of a loan amounting to £1,250,000. By eectiou 4 of the Mortgages and Deposits Extension Act, 1921, the moratorium was extended to December 31, 1024. The bank has realised that, differentiated as it is from other banks and financial institutions in this country by the fact that the Government holds for clhe people of New Zealand a considerable proportion of it® shares, and that it must ibe the desire of the public as shareholders that the directors should, so far as it is consistent with their duty, render to the Government such assistance as they justifiably can in providing money for mortgage purposes for settlers. The raising of money on the London money market has grown more expensive owing to the demand for capital, and even when such money is raised the Government is faced with heavy expenses of exchange in the transmission of the proceeds to New Zealand, but it is essential that further funds should be found for* the .State Advances Office if it is to render .the assistance required for the purpose mentioned and possibly also for the moratorium. TERMS OF LOAN.

“In these circumstances the Bank of New Zealand has voluntarily inbimated to the Government that it ia prepared to advance the large sum of £1,250,000 at 5J per cent per annum for a term of ten years, but repayable at any time within that period on giving reasonable notice of that intention if the Government finds that it can finance more economically in some other way. This offer is a satisfactory one when compared with the terms upon which the Commonwealth loan of £10,000.000 ia now being raised within Australia. On the five-year stock of that loan the return to the investor, including redemption, is £6 7s 2d and on ten-year stock the return to the investor is £6 4s per cent., while the Comm'onwealth has to bear in addition t<A tliese rates all the expenses (of flota* tion. The loan of £1.250,000 offered by the Bank of New Zealand at the rate of £5 5s per cent, will • involve the Government, of this country in payment of no flotation expense® what« ever.

"To enable the bank to carry out ite offer it is intended that it should issue further capital under seoti-oo 12 of .the Bank of New Zealand Act, 1'920. The bank was authorised, with the consent} of the Minister for Finance, to radio new capital to the extent of £2,250,* 000 and this authority has been ear* ha wted with tiie exception of 000, which it still has authority .to is* sue with tlie MinisterVi consent, and this consent I have given. It is pro* posed to issue this remaining capital bw £1,250.000 shares of £1 each. Of tbesA shares one-third will be issued to and taken up by the Government In th 4 terms of the Act and will rank as pre* ference ‘B‘ shares. The remaining tw"o* thirds will be offered to other holders as ordinary shares. A GOOD SIGN. “It is a source of satisfaction that in a comparatively amall country like New Zealand the Government should be able to raise a large sum of money with th«> assistance of a local institution on terms such as I have indicated. Tha procuring of the money in New Zealand means a saving of two per cent, on the total amount, as compared with wJuit the cost would have been had it been, necessary to transfer the from England to this country. At Uia present rates the saving would be £22,500.”

In further explanation of the proposal Mr. Massey said this loan would take the place of his recent proposal to furnish the State Advances Department with an additional £400,000 per month. Applications had been falling off of late and he anticipated that thl« money would be sufficient for some time.