DOMINION LOANS.

Taranaki Daily News, 11 October 1921, Page 8

DOMINION LOANS.

HOW SOUTHLAND GOT MONEY. EXPLANATION BY PREMIER. . (From Our Parliamentary Reporter.) Wellington, Oct. 6. The Prime Minister was asked by Mr. J. R. Hamilton (Awarua) for information regarding the Southland Power Board’s loan. Mr. Hamilton said it naa been reported that this loan had been raised on better terms than the Government loan. He would like to know if it was possible for a local body to get money in London on better terms than were given to the New Zealand Government. The Prime Minister said' that he would have to trust his memory for some of the details of the transaction. He first heard of the proposal to raise money in London for the development of hydro-electric power in Southland about two years ago. He was in London at the time, but he was not asked to take any action in the matter. An attempt was made at that time to place the loan upon the London market, and the attempt, so he was informed, was a failure. He did not know that officially. About eighteen months ago the chairman of the Southland Power Board and one or two members of the Board came to Wellington and urged upon him the importance of their undertaking. He had been quite willing to admit the importance of the scheme and quite willing to render all the assistance possible so long as nothing was done to interfere with the raising of money for the general needs of the Dominion. He was aware then that it would be necessary for the Government to go to the London money market before long. He arranged with the Treasury to make certain advances to the Southland Board, on condition that the Board should raise a loan as soon as possible and refund the advances to the Government. The amount advanced was in the neighborhood of £(100,000.

Then some months ago, continued the Prime Minister, Mr. Rogers, representing the Board, went to London for the purpose of raising the money. He met Mr. Rogers in England and was informed that it was almost impossible to make'' the Southland loan a success unless it had the guarantee of the New Zealand Government behind it. Financial authorities in London confirmed this view. Mr. Massey therefore agreed that the guarantee should be given, one of the conditions being that the Southland loan should not be placed on the market at the same time as the New I Zealand loan.

“The New Zealand Government loan was placed on the market first,” added Mr. Massey. “The interest was 6 per cent., and the minimum price was £96. It went off within a very few days, although the whole of the money was subscribed the first day. I understood at the time that some of the people accustomed to that sort of thing had attempted to bear the loan on the first day with the object of sharing in the underwriting profit. The attempt did not succeed, and the next day the loan went up in price and is almost at par I now. Thon came the turn of the Southland people. They advertised their loan as a New Zealand Government loan. I • do not object to that, because the Government guarantee had been placed be- • hind the loan and it had really become [ a Government loan. The terms were the ! same as the terms of the other loan, 6 per cent, at £96. The whole of the Southland loan was taken up in the first forenoon. It was a tremendous success. There is no doubt about that. But the success was a compliment to New Zealand. That is the point that I want to make. That is the whole history of the Joan as far as I know it. The terms of the two Joans were ©X’ actly the same and the results were as nearly as possible the same. The amount of the Southland, loan was £750,000, That will not complete the works, and the Board in two or three years time will require another £500,000 or £750,000. 1 had a telegram from the chairman of the Board thanking us and stating that the loan would not have gone off so well without the guarantee of the New Zealand Government.

“We cannot go on living guarantees of that kind. I wanted to get as much money into the country as possible in vifW of unemployment last winter, I have no doubt that the Southland works are urgently necessary and will pay good interest. But to place the Government guarantee in the hands of all local authorities would very seriously

affect the credit of the country as a whole.”

The Prime "Minister proceeded to inform the House that since the, raising of the main loan he had arranged for the borrowing of a little more money in London. There was provision in one of the statutes that if the Government was authorised to borrow a certain sum in. London and had to issue the debentures at a discount, it might raise an additional loan in order to bring the amount, of money actually received up to the full total of the authority. The discounts and other costs in connection with the £5,000,000 loan had amounted to about £3'50,000. Money was now becoming cheaper in the London market ami he hoped that this movement would continue. He had given instructions to New Zealand’s financial agents in London to place a supplementary loan in order to bring the total received- up to

£5,000,000, and he had since been informed that the loan had been raised. He had directed that the price of issue should not be less than 99, and he was informed that the money had been secured at £99 ss. That was a highly satisfactory transaction, although the amount was only a small one. It proved again that the credit of the Dominion was particularly good, since the transaction was one of the most favorable that had taken place in London for a long time past.