WELLINGTON NEWS

Hokitika Guardian, 16 June 1931, Page 5

WELLINGTON NEWS

THE LONDON LOAN. (Special Correspondent). WELLINGTON, June 15. Some people see.n rut tier too anx.oiii to comm.serate the iugnt Him, v-eoigt I'oroes in respect to me loan issued m London on .June Bth, but tiny li.ive no io.iso'u ior u»ing so. hirst of all it must lie remembered that i11..* loan was n.-fc issued without the fullest enquiry | as to the conditions and as to the opinions of those best able to adviie on such an important financial question. 'I he Government, no doubt, .sought the advice of its own financial adviser in London, and furthermore as the Bank of England is the Stock Agent for the Dominion, the advice of the men in control of that great institution was probably obtained also. The Iran was launched after such full enquiry, and although the public response was disappointing in that only 32 per cent, ol the issue was taken up by the public, the underwriters being left with the balance, the Government actually obtained the money it required. It is the underwriters who are weeping. The loan was issued at 99, that is to say for a bolul of £IOO, hearing interest at 5 per cent., and having a currency of a limit of three years, the applicant or subscriber {iaid £99. The underwriters’ commission would ho 2 per cent., possibly 3 per cent., in view of the stringent economic conditions, so that for tho (IS per cent, of the loan that they had to take up, they have paid only £9/. It was reported, that there were dealings in the script at £9B and £97 2s 6d, which means that at the former price the underwriter who sold made a profit of 1 per cent., and at the latter price a profit of one-eighth of lporceiit. The Lank of England discount rate was reamed >rom 3 per cevt to 2. per, <ent., which m do the London m. nev, market invitingly die p. The Indian, Government was prompt on the nnirx--1.1 with a 6 per cent £L0,000,030 loan with a currency of three years but unfortunately we were not informed as to the'results, but it is possible that the underwriters were left with a small part of the issue. The loan was attractive enough at 0 per cent, at par, but the political situation in India has not been such as to engender confidence. Towards the end of .March the Lancashire Cotton Corporation issued 6i per cent bonds for £2,000,000 at 971 and for this issue only £BO,OOO or 1 per cent was subscribed by the public, the underwriters being left with the bal--a lice. About the same tinto as the Indian loan was placed on the London market Canada floated a conversion loan for ‘25.000,000 dollars (£5,000.000) within her own binders. The issue that w.'is converted carried 54 per cent, iiitet'est hilt the loan jlist rU-iscdi cuiri d4J j eib cent,, it saving of 1 per cent, to the Canadian Government., Vet, tiothvyitUstanding the low rate, the issue was subscribed twice over, This looks rather remarkable, but when it is remembered that Ottawa is, figuratively speaking, just a stone’s throw from New York where money on loanable credit is in abundant supply and cheap, there is nothing remarkable about the Canadian success. The United States issued early this month long term Jreasmy bonds for 803,000,000 dollars (£160,000,000 which shows that the country is flush of money. it is worth noting tins differences displayed on both sides of the Atlantic. in Loudon the Indian and New Zealand loans were short term issues, and carried high interest rates, (i per cent, and 6 per cent, and were not well received, A whereas in Ottawa and New York, the loans were long term issues ; they were eagerly taken up by the public, notwithstanding the low rates of interest. The fact of the matter is the financial authorities who were responsible for advising our Government were apparently not fully seized of the psychology of the London money market. There is ample loanable credit in London, but investors appear to be lacking the confidence, ana, they have had much to make them nervous and cautions ; and they have no doubt refused to distinguish New Zealand fiom Australia. The underwriters appear to be holding a considerable quantity of undigested stock.