Manawatu Evening Standard. WEDNESDAY, SEPT. 18, 1929. THE CONVERSION LOAN.

Manawatu Standard, Volume XLIX, Issue 248, 18 September 1929, Page 6

Manawatu Evening Standard. WEDNESDAY, SEPT. 18, 1929. THE CONVERSION LOAN.

The announcement that the conversion of another ,£5,000,000 of the 1929 stock shortly maturing has been underwritten in London is a matter upon which the Dominion is being congratulated in London. The new £5,000,000 loan which is being issued at 5 per cent., with a discount of £5 per £IOO worth of stock converted, replaces a similar amount upon which interest was payable at the rate of 4 per cent., and as a cash bonus of £2 per £IOO is being given to those converting the old- stock the operation is a costly one to the Dominion, involving an addition to the public debt of £350,000 and an additional interest charge of £50,000 per annum. The terms are all in favour of the stockholders converting, so that there is nothing very remarkable in the success which the underwriting suggests has attended the liquidation of the old stock and the issue of the new. But, before a true estimate of that success can be obtained, it is necessary that we should know what proportion, if any, of the new stock is left in the liands of the underwriters. The fact that about £4,700,000 of the debt remaining on the 1929 stock is to be paid in cash on November Ist will, no doubt, be of assistance to the underwriters in disposing of the £5,000,000 which is to be converted, as it is only reasonable to suppose that at least 50 per cent, of the old stockholders will take advantage of the exceptionally favourable terms offered. The wisdom of financiers responsible for such large sums of loan moneys falling due in any one year—£29,ooo,ooo had to be arranged for in 1928-29 —is open to very serious question. It should not therefore be forgotten, in view of the suggestions made in certain quarters that the Reform Administration is responsible for anything approaching an unsatisfactory state of the public finances over these conversion proceedings, that the old Liberal continuous Administration made the arrangements which have landed the country into the difficulty of renewing, or repaying £29,000,000 of loan moneys that have had to be met this year. The new stock is repayable in 1935-45, and that means that, in six years from, the date of the new stock being taken up, it may be repaid if monetary conditions are more favourable in London, and a cheaper interest rate is obtainable. But, in certain quarters, there is the feeling that the Government would have done bet-

ter to issue Treasury bills to meet the maturing liability. But there is no present prospect of money becoming cheaper, and the chance of Sir Joseph Ward being able to borrow money at 4£ per cent, to lend out to settlers and workers at 4f per cent, without its costing the country an additional penny of taxation appears more remote than ever. Manifestly the country cannot lend out money at the rate promised, while it is paying a higher rate of interest for the moneys it is obtaining on loan to meet its old liabilities, and it has to be noted that Sir Joseph Ward is paying for renewal purposes \ per cent, more than is payable on the new loan of £7,000,000 floated in January. That money, by the way, is said to be invested in London, where the £4,700,000 is to be “paid in cash” on November Ist. Where is the cash coming from? Certainly not from this country. The question therefore arises whether the Minister of Finance (Sir Joseph Ward holds that office), has decided to utilise that portion of the £7,000,000 temporarily invested in London to pay off the remainder of the 1929 stock now falling due. It looks like it.