N.Z. BREWERIES, LTD.

NZ Truth, Issue 1240, 5 September 1929, Page 22

N.Z. BREWERIES, LTD.

__ * (By "Fiat L\ix.")> In connection with the new capitalisation proposals put forward by the Directors of New Zealand Breweries, Limited, at the recent annual meeting', "A Debentureholder" submits the view that compared with the ordinary shareholders, the debenture-. * holders are being treated somewhat inequitably.

TN.dealirig- with this subject m pur is-. *. : sue: of -July 25, this writer expressed the Abpi'iiioh that the. company was treating debentureholders most liberally and VDebehtureholder's" letter has not altered that opinion. ! . , The basic error made by I'Debentureholder". is that he looks upon the 6& ben tur.es- as participating' preference shares entitled to .: share m all profits; both trading and capital. Instead; they are actually and legally merely an advance' on mortgage secur-.' ity : at' an exceptionally high rate Of interest-— lO per cent. A Jt: must not be forgotten that the company held the . right. to repay .these debentures, at par . - ■ ih'l933; and it is merely* the broad . arid liberal-minded-' ness :of the directors which enables «*<»v.»ritiii-« ■■''- l-i older a „

debenture - noiaers „...-. y . -: y , to v convert £ 2 worth .of ..debenture capital into (at present market prices) £2/16/.4\ worth of .share capital. : In' this 'critic's opinion, .' debentureholders would be well-advised to convert'; their : stock . into, shares upon: the terms-o ffered: '■' YY ,>"''■'•:' A'!A AAA ;;■-.;, y' " ; The" directors, may not again .be. foun'd'in such a magnanimous mpod as to make' debenture-holders a present . such as' is. no^v, offered and may. as they ari;. legally ■entitled to do, redeenr ' at par iri 1933./. A A , ' -y . .; ; . "Deberiturehdlder," m support of his case, shows that £1000 of debenture capital' now brings m a return of £100 per annum, whereas, when converted • into shares on. the basis of £2 of-de-benture' capital for £1 . shares. ; even provided 'that the past rate of dividend. — -15 per cent. — is maintained, " will be worth only: £75 per year.

Ample Resources

That is so, but it has to. be' remembered that since tlie debentures haVe been the, holders, have been: m the position of ■mortgagees drawingvery substantial interest on their security. Ordinary shareholders had no security at all and were compelled to take all the risks. That the undertaking has .proved- to be an extraordinarily successful onei and that shareholders have benefited accordingly, seems to this critic no reason why, at this later date, debenture-holders should equitably, or legally claim any share at all m such success — they took practically no risk and got 10 per

cent, for doing it. Except as a -policy move to placate the public, who are now given some slight idea of the

enormous profits made by the brewing combine, there appears to be no reason at all for tho directors' action m this matter. The debenture issue, could have- been paid off at par m 1933, and the money to do it with could easily have been raised by issuing ordinary shares a$ a premium of- at least as much again as debentureholders are now asked to pay for the conversion. , It must not be forgotten that although the 'immediate cash -.return on the conversion will be less on a 15 per cent.' dividend basis/as ' from April : 1. 1929, those who choose to convert will share m all future bonus distributions. The present distribution has not, depleted the resources hy any means a^d there is still .plenty . "under .the. clock."