FIVE MILLION LOAN

Otago Witness, Issue 4031, 16 June 1931, Page 60

FIVE MILLION LOAN

THE LONDON ISSUE DISAPPOINTING RESPONSE. LONDON, June 9. The underwriters receive 68 per cent, of the New Zealand loan. FACTOR AGAINST THE LOAN. LONDON, June 9. The Daily Telegraph's financial editor says: “ Since the underwriters are left with 68 per cent, of the New Zealand loan, dealings in the scrip were inevitably unsatisfactory, opening at 1 per cent, discount. As there was no encouragement for the market to take the stock it went to 2 per cent., closing at 1-J per cent, discount. Although New Zealand has always a high reputation in the financial world, the close proximity of Australia does not help the Dominion when borrowing.” ALLOCATION OF THE MONEY STATEMENT BY PRIME MINISTER. WELLINGTON, June 9. , The Prime Minister (Mr G. W. Forbes) made a statement to-day in regard to the New Zealand loan of £5,000,000 which was underwritten last week in London, and placed on the market there. “ From a variety of causes the longterm market is very difficult, and under present conditions it was deemed advisable to shorten considerably the term usually offered for New Zealand loans,” he said. In view of all the circumstances .he considered that the terms of the loan must be regarded as satisfactory. The loan will be allocated as follows:— Public works, £3,000,000. Electric supply, £1,000,000. Redemptions, £1,000,000. DEAR MONEY. WELLINGTON, June 10. The Prime Minister and Minister of Finance (Mr G. W. Forbes), when approached to-day, confirmed the report that the underwriters had been left with about 68 per cent, of the loan and also that, dealings in the bonds on the Stock Exchange yesterday commenced about 98 per cent, and closed about 97 J per cent. Commenting upon the result, Mr Forbes remarked that it was quite evident that New Zealand was the victim of a variety of unfavourable circumstances operating in the .London money market. “It is well recognised,” he said, “ that the Dominion s loans are generally favourably received on the London market, and it is an unusual occurrence for any portion to be left with the underwriters. lu this connection it may be of interest to note that the last occasions on which this occurred were in 1921, when the underwriters were left with 58J per cent., aud in 1925 with 85 per cent.” The Prime Minister concluded by saying that the cost of the loan to the taxpayer, including expenses and redemption of the discount over a three-year period, worked out" at approximately £6 Is 3d per cent. This rate certainly represented dear money, but the result clearly showed that new capital was not obtainable at a lower price.

BRITISH PRESS COMMENT. LONDON, June 10. The Financial News, in an editorial, says: “The failure of the New Zealand issue has given an unpleasant hint that the quarters which usually take up large blocks of such issues are at present somewhat overloaded. The response was surprisingly poor, but this was not so much due to dissatisfaction with the yield as to general disinclination to shoulder new commitments overseas.” Following is a summary of New Zealand loans issued in London in recent years, excluding conversion loans, the net yield to the investor including redemption of the discount at the end of the respective loan periods:— Rate Issue Net

Last year’s loan, which was issued on May 6, was oversubscribed in a fewhours; there were 21.852 applicants for a total of £19,577,800. It was a longterm loan, the stock being repayable at par on December 15, 1949. The present is a short-term issue, five years being the limit for an official “ short.”

In conversation with a Southland News representative the Invercargill tourist officer (Mr J. A. Malcolm), remarked that the department was making more direct attempts to capture a greater percentage of the world’s tourist traffic for New Zealand. Last year, pamphlets were distributed throughout Australia advertising trips to New Zealand, tours of any length and visiting various resorts, which were sold at a flat rate. This proved a successful scheme, and was now being extended to include Great Britain, Canada and the United States of America. Forty odd tours were being advertised, varying in length from a few days to several weeks, and it was thought that this would simplify matters very considerably for anyone wishing to visit the Dominion.

Amount. P.O. price. yield. 1923 .. £4.000,900 4 , 02 £4 12 6 1924 .. 5.000.000 4% ' 05 4 18 1 1925 .. 7.000.000 444 9444 4 IS 10 1926 . . 6.000.000 5 9S44 5 2 6 1927 .. 6.000.000 5 0044 5 0 10 1928 .. 5.000.000 444 9444 4 19 2 1929 .. 7.000.000 4’4 05 4 16 5 1930 .. 5.500.000 5 09 5 18 1931 .. 5.000.000 5 99 5 7 5