WELLINGTON NEWS

Hokitika Guardian, 15 May 1928, Page 4

WELLINGTON NEWS

LOANS IN LONDON AND NEW

YORK. (Special to “ Guardian.”) WELLINGTON, Way 12. Doth New Zealand and the Commonwealth of Australia have succeeded in raising -1) per cent loans, New Zealand’s loan being raised in London and the Commonwealth loan of 50,000,000 dollars (£10,000,000) being raised in New York. The New Zealand loan, which was underwritten, was issued at 94J- and the Commonwealth loan at 92.), and on the basis of a Hat rate of interest, the New York loan returns £4 17s per cent and the New Zealand loan £5 15s 3d per cent, so that the Dominion secured its loan at a slightly cheaper rate. The point worth emphasising is that money has been procurable both in London and New ' oik on a it per cent basis, which indicates that the general tendency of money is to ease, and that of itself is welcome news. There has been a disposition on the part of some people, particularly politicians to credit New Zealand with superiority in loan raising because the Now Zealand loan was the first to he. placed at 4) per cent since the close nl the war. The success of the Commonwealth discounts the New Zealand boast. It is not that the credit ol either of the countries has improved but that loanable money is becoming more abundant and therefore cheaper. The Commonwealth has been borrowing rather freely in recent years and so have the Australian States and New Zealand. Last year the Commonwealth Government issued in London a conversion loan tor £*11.711.000 in April, a loan of £7,000,000 in July, another loan of £7,000,000 in November, besides raising 10,000,00.) dollars (£8,000,000) in New York. Early in March this year the Commonwealth raised C8.0C0.000 and only two months has elapsed and another loan of £10,000.000 has been raised in New York: The Now Zealand loan Hooted a few days ago was over-subscribed and the Commonwealth loan has been promptly taken up. Ihe loan procedure in the two capitals differs l.iateri ally. 11l London a loan is underwritten. and quite a number of firms and individuals may lie members of the underwriting syndicate, The underwriters guarantee the flotation of the loan, lor it is part ol the contract that they subscribe for any portion ol the is'-ue not taken up by the public. In the ease of the New Zealand loan, as the issue was over-subscribed, all that fell upon the underwriters was the onerous task ol pocketing the underwriters’ commission. Such a pleasant experience does not ollcn lall to the lot of the underwriters. 01 the ten loans llonted since the beginning of llidf. by the Commonwealth. Australian Stales and local authorities, aggregating £-11.(100.1100. the underwriters liad_ to provide £150.1’ 18,000 or 712.05 per cent. Only two of the ten loans were over-subscribed, these were the \ ietorian loan of £1.000,000. issued in October 1027, and the V.Yslern Australian loan for t1i.000,0110 issued last. month. No doubt the underwriters have since unloaded on the public. In Ni w fork loan issues are not underwritten but are purchased outright by syndicates of banking and issuing bouses, the members of the syndicate selling the loan to the public over the counter and the differemo of the prices between which they buy and sell represent the profit. The New York practice appears to be to treat a loan as merchandise, the wholesalers acquire the loan and retail it. Canadian loans are well known in the Cnited Staes, and all such loans floated in New York lasi year carried I or -1.1 per cent interest, all other foreign loans earning ■> per cent and over, some carrying as much as 7 per cent, so that obtaining money in New York on a 41 per cent basis, 1 lie ( omnioiiwealili Government has done exceedingly well. The l nited States lias immense wealth and can afford to lend freely to foreign countries. but the Americans are nothing il not careful in their foreign investments. According to Sir Hugh Reinson, former Commissioner for Australia in the L'nited Suites, American bankers have representative men to study Australian conditions. ’1 bey have expressed a willingness to provide funds for Australian public works, but they prefer that the Commonwealth shall he the borrower. The money borrowed by the Commonwealth in New York will most likely be transferred to London, as was the ease with the loan raised last year. In that ease London will he able to draw gold from New York. At any rate the dollar exchange is not moving towards the gold point. America can spare the gold. i