FOUR MILLION LOAN.

Dominion, Volume 5, Issue 1466, 14 June 1912, Page 5

FOUR MILLION LOAN.

EFFECT ON EXISTING STOCK By Telegraph-Press Association-Copyright, London, June 12. The underwriters of tho New Zealand four million loan will receive 87 per cent, of tho issue. "Tho Times" says the market did not like the issue, not only because the amount was inconveniently large, but bo.causo the yield was so high as to mako existing colonial securities look dear. No doubt the terms of this loan more nearly represent the facts a3 to" the credit of Now Zealand and somo other countries than tho ideas hitherto prevailing in official circles. "FINANCIAL TIMES" VIEW. (Rcc. Juno 13, 11 p.m.) London, June 13. Tho "Financial Times" says that in view of tho attractive terms offered, the result of the New Zealand loan indicates that the market for investment issues is overfed. "AN EXTRAORDINARILY HIGH RATE." A CHRISTCHURCH SUGGESTION. (By Telegraph—Spocial Correspondent.) Christchurch, June 13. A local financier who was seen by _ a. "Press" representative to-day regarding ■ the loan and the comments of "The Times" thereon, stated that on the figures there was no doubt that the country was paying an extraordinarily high rate of interest for the money, which indicated either that < tho credit of New Zealand was not standing very high in tho financial world, or that tho best bargain had not been made by whoever had control of the negotiations. One must conclude that those responsible had done tho best they could, but there was no proof that what was done was the best that could have been done in tho interests of tho country. The money would cost at least five per cent.; how much moro it was impossible to say at present, The device of giving the loan a two years' currency was really a gamble on the future, and was not sound finance, and if tho market was higher then than it was at present tho cost of tho present loan and the renewed loan would work out at a very heavy rate. The comment mado by tho London "Times" was really most damaging to the credit of tho country. A local bank, manager expressed tho opinion that generally speaking borrowing on short loan was a. policy to be very much discouraged. "We ought to borrow for periods of certainly not less than fivo years, and put the loans on the basis of a very favourable class of security. I think it could be done by issuing bonds redeemable at the option df the Dominion in five years, but not payable until, say, fifteen or twenty years. This class of security came into very great favour at the time of the American War .of Secession, when tho Government of the United States issued what are well known as the 5-20 debentures. These bonds were at the option of the borrower to be paid off after five years, but-could not be called up by the lender until twenty years after the date of issue. They were very favourable security, and tho advantage of the system was very great. Even if tho money were borrowed at a high value of interest, tho borrower had the option of paying off the loan at the end of a comparatively short period, or at any time between the five and twenty years. That is the system which should be followed by New Zealand, and no doubt it is well known to many financiers." "A DISTINCT WEAKNESS." (By Telegraph.—Preps Association.) Dunedin, June 13. Prominent financiers and mercantile men, when seen by a Dunedin "Star" representative, expressed the opinion that the floating 'of a' four million loan for two years showed a distinct weakness in our finance. _ Money must become tighter and rates higher in a very short time. A sharebroker pointed out that an Indian loan of three millions floated in London itn April last was underwritten to exactly the same amount, viz., 87 per cent, of the total was left in the hands of underwriters. / Home papers, commenting on this, said evidently the English investor now wanted a higher rate of interest on his money.