FINANCIAL

Hokitika Guardian, 2 May 1927, Page 2

FINANCIAL

Australia «& N.Z. Cable Association.

NKAY YORK. April 29

The recent New South Wales financing here, which caused considerable dissatisfaction among at least three of the banking houses, who during the last few years have sent their representatives to Australia in the hope of obtaining business, lias resulted in more discussion on Wall Street. It is pointed out by a good authority that the reason why New South Wales was awarded the second twenty-five million dollar loan by tlie Equitable Trust was a clause in the contract for the first loan providing that the Equitable Trust be given any flotation of the N.S.AV. State Loans that might occur here within three months thereafter. It is understood that the general circumstances surrounding the New South AYales entry into the New York loan market arc as follows:—The State finding that it was unable to negotiate any loan in London on favourable terms, it being intimated there that the best it could realise would he in the neighbourhood of 92, the New South AVtdes Government thereupon made inquiries here, and the financial houses connected with the biggest banking group in America offered 91. This was considered so unsatisfactory that, for the time being, the idea, was abandoned of entering the New A'ork market. It was then that a newlv-formed syndicate in Australia, with connections in New A’ork. informed the X.S. AYales Government that the Equitable Trust would be ready to advance tbe necessary tweutv-five million dollars at a rate giving the State an ultimate return of 93.227.

Three New York banking houses, at the same time, cabled to New South "Wales asking that they be permitted to bid. It is alleged that one house was advised not to act at that time, while the other houses’ bids were ignored. One of those firms now claims that it was prepared to offer terms better than the Equitable Trust, and it asks why the loan was not open to competitive bidding in some form. It contends that if a provision in the Equitable Trust’s contract bad not made it necessary For the State to return to the Equitable Trust for the second loan of twenty-five million dollars, this loan could also have been raised here on bettor terms than those obtained. It is contended that, while the usual charges made on foreign loans in New York provide for two per cent underwriting fees and two per cent commission, the keen competition which exists and the plentitude of funds makes it wholly likely that the combined charges for Australian financial needs can be reduced to two and a half per cent., and that a failure to invite c mipetitive bidding means a loss to the borrower.