LOAN CONVERSION

Waikato Times, Volume 125, Issue 20888, 21 August 1939, Page 6

LOAN CONVERSION

LONDON OPERATION PART PLAYED BY BANKS ! .NO COMMISSION ARRANGEMENT j “There is everything to be said for J secrecy at the proper times, but it | must surely be to the good that the j inner history of the New Zealand loan | negotiations should he appreciated h\ | the people of New Zealand,” wrote ! Mr L. D. Williams, City editor of the i Daily Mail, London, in an article pub--1 Jisher on July 3J. | After referring to the difficulties , which stood in the way of convert- ] ing the £17,000,000 Conversion Loan. , maturing on January l, 1940, dilflculI ties which were not of the City's .making, Mr Williams said: Mr Savj age's Finance Minister has himself ; acknowledged the entire sympath> i and loyal regard for his important quarter of the Empire which he found during his stay here. At the same time, our lelJow Britori6 in New Zealand will hardly he content to permit their loan conversions to be subsidised by British hanks without insisting on Hie necessary financial changes to prevent such a tiling happening again. Vehement Protest* “I think it questionable whether the banks ought to have been asked to guarantee the new £16,000,000 1 loan at all. Certainly the bankers protested vehemently at the meeting witli Mr Norman. What they were asked to do, they said, was not banking business. This loan was not underwritten in the ordinary way. There is not even a commission. “Of the £16,000,000 conversion issue, the banks undertook to shoulder up to £6,000,000 any part of the loan that is not covered by conversion or cash applications, the remaining £10,000,000 being similarly guaranteed by the Bank of England. There was, at one time, a proposal to bring in smaller institutions. “The hanks apparently had no complaint about the absence of commission. This counts little if there is an appreciable discount in the price when dealings have started in the market. But in the event of a discount, the arrangement simply means that the banks will have to write off the loss out of their surplus and reserve*, which in these days, as pointed out, are not what they were. Mr Norman, on the other hand, contended—and e\eryone gives him full credit for the undoubted correctness of hi* attitude —that the alternative was & default which could not be contemplated. In the end the bankers agreed. “Somathlng for Nothing" “That the guarantors expect to take up a certain amount of stock goes without saying, otherwise there would have been a readiness of the market to underwrite in the normal way. “Possibly these fears will not prove as burdensome as at first appeared, especially 6ince the good reception given by the market to the conversion scheme. But the main point is that the banks have done again what they have often done before—though without much recognition—namely, given ‘something for nothing,’ this "time to help New' Zealand out of a hole. “I II: ink it right that everyone should know about this, and trust that frank understanding of the facts will encourage New Zealand in efforts to restore her credit to the particularly high level it has stood at in the past. Certainly if this is done the further heavy loan maturities in the next few' years will cease from worrying either the New Zealand authorities or the City.”