LOAN CONVERSION

Hokitika Guardian, 22 December 1933, Page 5

LOAN CONVERSION

ORIGIN AL SCHEME

SUPPORT REFUSED BY BANKS.

(Per Preu Association — Copyright.)

December 21. The. scheme 'originally/proposed in Jumuaryi Sfor hhe’ conversion of, the 'State’s, internal debt- / was rejected by the Associated Banks, and the scheme adopted: and implemented in the New Zealand Debt Conversion Act and other legislaton, • was only a, later ;. and alternative - suggestion by, the Government.- This fact is reveialed in a y pamphlet ; ‘ ‘R e Record of . the Internal Debit Conversion, 1933,” .which' was issued' to-night by the Minister for Finance] the Rt. Hon. J. G. Coates.

Tlie, pamphlet, which is an historical record, pf'ttlie' .origin, framing, and operation, of the debt conversion scheme,' . declares that • under the terms , of \ the; original' Government, proposed to determine all. its; existing- issues ; at a given date by formal public notice. The bondholders were vthon •to be given the option .of converting into the new issue at 4 per cent., bv of accepting repayment. :of their Vpfincipnl moneys. This ' course, contingent bpon'Sth.o banks-*' agreeing to:'support, the. scheme by virtually underwriting the new 4 per cent issue. Outside avenues of investment were to he almost entirely closed, to investors, and they would accordingly have .been (bdund; ;fo take one or other of . the dehn4d’ : courses. If they' chose to -uplift, their principal, states the pamphlet, it would necessarily flow into the h a nks, and dffset any large amounts of new issue which the hanks • might hev© to contribute under‘the underwriting' arrangement. Tt would have been essential for the hanks to prevent the flight of capital beyond the Dominion, but in-view of the low investment, rates operating overseas, the. Government did net anfeipate much difficulty, in this' direction. ’ v ? ' ‘

Under tuqso ‘proposals 'conversion;/, was, of coujrse, -to-be., quite . The origipai scheme ‘jjdsb'!covered the conversion. op‘local body securities, and tlid esitabasnipent/qf : a; basic local body interest ratoon a plan similar to that finally adopted, n f‘The whole scheme,” ; continues the pamphlet, “was rejected by the bank's jn a letter dated January 26, 1933, dp the ground that the proposed underwriting - of -new .Government issues " would bo too large an operation for them to undertake. The banks intimated dheir .willingness, however, to co-operate in any approved plan for the conversion of loans domiciled in New -’ Zealand so f- is it would be imtheir power, to-do> •Oi ,