“TIME NOT COME”

Taranaki Daily News, 8 November 1932, Page 5

“TIME NOT COME”

CONVERSION OF LOANS

NEW ZEALAND’S POSITION

MR. FORBES’ EXPLANATION

LOCAL BODIES-’ PROBLEMS

SINKING-FUND CARRY-OVER

Reference to the question of conversion loans and their application to New Zealand was made by the Rt. Hon. G. W. Forbes, Prime Minister, in the course of responding to a toast at the banquet at Stratford last night. He said the time had not yet arrived when New Zealand could take advantage of the number of loans with optional maturity dates. Mr. Forbes referred also to local body loan repayments.

Much had been heard of the conversion of New Zealand loans on the London market now that the rate of interest had dropped so considerably there, said Mr. Forbes. The only New Zealand loan that could be dealt with was that issued last year when £5,000,000 was borrowed by 5 per cent, bonds payable on July 10, 1934, the Government having the option to redeem the bonds on or after July 10, 1932, on giving three months’ notice. EXERCISE OF OPTION. The large conversion operations of the Imperial Government related to loans that had an optional maturity date. Australia, too, might be able to take advantage of the position as the optional maturity date 'of a' large number of Commonwealth and States loans had already passed. New Zealand had a number of loans with optional maturity dates but the time had not arrived when the option could be exercised. So far Mr. Forbes had received no information regarding the negotiations the Hon. W. Downie Stewart (Finance Minister) had been conducting in London, but he presumed that it would be necessary to wait until the British copversion loans which had been operating lifted. At the request of some local bodies inquiries were being made in London by Mr. Stewart and Mr. A. D. Park (Secretary of the Treasury) regarding local body loans that were maturing in the near future. Large sinking fund amounts had accumulated in New Zealand for their repayment upon maturity, but, owing to the high cost of exchange, the remittance of such large amounts to London would prove meet expensive for the local bodies concerned. EXTENSION MAY BE APPROVED. Suggestions' that the loans should be extended if possible for five years and questions whether the sinking funds could be carried over to renewal loans had been received from time to time. “I have received cable advice from Mr. Stewart to the effect that opinions in London favour renewal loans from ten to 15 years in preference to the five-year periods,” Mr. Forbes said. On account of the embargo by the Imperial Government present market restrictions did not permit of conversion operations unless the loan had actually matured, Mr. Forbes said. Local bodies would have to wait until the embargo was removed before the conversions could take place. He thought that steps would be taken to lift the embargo when the Imperial Government’s own conversion operations were clear of the market.

Mr. Forbes was convinced that there were no serious objections in London regarding the suggested carry-over of sinking funds. Legislation would be required and he had asked the Local Government Loans Board for an expression of opinion on the subject. The board had recommended that the legislation be obtained but the matter had yet to be considered by Cabinet. He had also asked the Municipal Association for its opinion. “It has to be understood,” said Mr. Forbes, “that such sinking funds as are carried, over will not pass back under the control of the local bodies but will remain with sinking fund commissioners as the nucleus of a sinking fund for the new loan to be raised to redeem the old one.”