PAPERS RELATIVE TO

B.—No. 4

16

Sub-Enclosure B. New Zealand Government Debt. Suggestions by the Crown Agents for the Colonies for the Conversion of the various Securities now in circulation into one common Stock, which may hereafter be added to, or reduced, without multiplying or altering the denominations. 1. The various unguaranteed debentures of the General and Provincial Governments to be consolidated, or exchanged for securities bearing interest at one uniform rate of 5 per cent, per annum. 2. All future loans to be contracted on securities of a similar character. 3. The new 5 per cents., or consolidated securities, to be issued either in the form of registered stock or debentures, at the option of the exchanger or buyer as the case may be. 4. The stock certificates to be accompanied by coupons payable to holder, in the same manner as debenture coupons. 5. The registered stock and debentures to be at all times exchangeable, the one for the other, on payment of a small transfer fee and stamp duty on the debentures created in lieu of stock. 6. The registered stock to be transferable from hand to hand by an ordinary deed of transfer. 7. The interest to be made payable quarterly, instead of half-yearly, as on the present securities. 8. The principal to be paid off' by means of a cumulative sinking fund, into which shall be paid quarterly a sum equal to ss. per cent, on the total of the consolidated debt. 9. This fund to be applied to periodical drawings (lottery) in the usual way. The bonds or stock certificates so drawn to be paid off at par. 10. The total debt will thus be paid off in about thirty-seven years. 11. It would appear advisable that the whole of the 5 and 6 per cents, (together amounting to £4,510,000) now in circulation, should bo dealt with in one operation. It is presumed that nearly all the former would be exchanged without hesitation, as the holders would, without having their interest reduced, thus participate in the contingent advantage of an early drawing at par. 12. It is roughly estimated that the results of conversion of the whole of the 5 and 6 per cents, on terms based on the present market prices of each —would be, Ist, the increase of the nominal debt by about 7f per cent.; 2nd, a decrease in the annual charge of about 12 per cent., or nearly £40,000 per annum ; and finally, the rendering available for general purposes of about £158,000 now accumulated in the sinking funds of the various General and Provincial Loans. 13. The remaining 7, 8, and 10 per cents, of the Provincial Governments, amounting in the aggregate to £499,000, might be afterwards dealt with on similar principles, and probably with greater relative advantages. 14. The consolidation ought if possible to be far advanced, if not entirely completed, before any fresh issue of securities takes place, as any such issue must tend to lower the price of the present 5 per cents, and proportionately to deprive the Government of the advantage to be derived from the relatively higher price of the fives as compared with the sixes which now exists. 15. It will also bo advantageous to convert the old securities, as far as possible, into new, before the 5 per cents, are again quoted ex dividend, as they will then have the appearance of having fallen about 2-j per cent, in price. 16. If the various existing loans could all be made to disappear from the official lists, and one uniform stock be substituted, it is more than probable that the sum still to be raised under " The Public Debts Act, 1867," would not cost the Government more than 5 per cent. 17. The market is now favourable for the operation, though not so much so as it was a month or six weeks ago; and it should be borne in mind that any political disquietude, or the revival of public confidence and trade, which political quiet would not fail soon to produce, must prove prejudicial. In fact, any change whatever must be a change for the worse, unless it be possible to conceive that money will still become more abundant and cheaper than it is at present. London, 25th March, 1868. P. G. Julyan. Memo. —The proposal to create registered stock was subsequently abandoned, in consequence of doubts having been raised by counsel as to whether clause 3 of " The Consolidated Loan Act" would justify the creation of such stock; and, although considerable advantage with regard to price might have been derived therefrom, it was thought better not to run the risk of having the authority for the issue called in question by persons who might, to serve their own interests, do much to create doubts in the public mind calculated to produce a prejudicial effect in the negotiation of the new loan. Article 14 was not acted upon because Mr. Eitzherbert, after weighing the probable advantages and disadvantages attending the proposition, came to the conclusion that it was due to the lenders to place openly before them, in a complete form, the whole of the operations contemplated under the " Consolidated Loan Act, 1867." It was, moreover, considered that in the event of delaying for any considerable period the issue of the new securities, political complications might arise in Europe calculated most seriously to depreciate the value of such securities, if not to render them entirely unsaleable. P. G. J.

Sub-Enclosure C. Conversion of the Public Debts of New Zealand under the authority of the Consolidated Loan Act, No. 90 of 1867. In order to remedy the frequent complaints which have been made by holders of the Provincial Government debentures, in consequence of the difficulty of negotiating these securities in the London market at their full value, as compared with those of the General Government of New Zealand, and in order further to increase the market value, and to remove the inconvenience arising from the want of uniformity in the securities of the General Government now in circulation, it has been determined, if possible, to convert the whole of the public loans of the Colony, General and Provincial, into one loan, to be called " The New Zealand Consolidated Loan."