LONDON LOAN, 1929

Nelson Evening Mail, Volume LXIII, 2 August 1929, Page 5

LONDON LOAN, 1929

•'BENEFICIAL RESULTS" In order to provide additional capital for public works, and particularly the acceleration of railway construction in accordance with the 'Government's poL

icy, a further loan of £7,000,000 was successfully floated in London on the Bth January last. Tho issue price of the loan was £95 per cent., with interest at 4J,- per cent. Tho loan matures on the Ist March, 1958, but the right is reserved to redeem it at par at any time after tho Ist March, 1948, on giving three monies' notice to holders of the stock. Over the full period the yield to investors with redemption of the discount is £4 16s Sd per cent., as compared with £4 19s 8d per cent, for tho short-dated loan issued last year. The cost of the new loan to the State, allowing for the redemption of the discount and expenses over the full period, is £5 Qs Id, which is cheaper than the cost of any other loan raised by the Dominion for sonio years. The issue was very favourably commented upon in the London financial papers, and in the light of subsequent events in the money market the Dominion is undoubtedly fortunate in having obtained a Joan on these terms, which are better, and in most cases considerably better, than those obtained by other borrowing States. Tho result is further proof of the confidence that London investors have in the financial strength of New Zealand, and shows that this great financial centre has not been misled by the mistaken propaganda concerning the Government's borrowing policy. Normally a-New Zealand issue for the then current year does not appear on the London market until about May, but in view of the information forwarded by our financial advisers in London as to tho general financial outlook for the year, I deemed it advisable to make a departure from the usual practice and go on the market for our requirements early in January. Subsequent events have amply justified this decision, and there is no doubt that with the rise of the bank rate, and the general situation that developed in tho money market, a higher price would have had to be paid if we had delayed going on the market until the usual time. As it is, although the capital was not required until this financial year, this fact does not involve the taxpayer in any loss. On the contrary, I have beeii able to invest the loan proceeds in the short loan market at an average rate of approximately £5 3s 9d per cent, with the most satisfactory result that a profit has been made on these moneys for the period during which they have been held. In accordance with the authorities under which it was raised,' the £7,000,000 loan has been allocated as follows: — £ Public Works Fund, for railway construction, roads,-.tele-phone extension 1 , etc.;; 4,500.000 Hydro-electric power works ... 1,000,000 Railways improvement 1,500,000 ... '- 0 .-,.>,-■ £7,000,000 In conjunction with this issue a further conversion offer was made to holders of 4 per cent. 1929 .New Zealand Consolidated Stock.