THE LOAN AND MERCANTILE CRISIS.

Wairarapa Daily Times, Volume XV, Issue 4471, 15 July 1893, Page 2

THE LOAN AND MERCANTILE CRISIS.

An Opinion from Wellington.

(By Our Own Correspondent),. Wellington, Friday,

Considerablespeoulation is indulged in here *ith regard to the method likely to be adopted by the N. Z. Loan and Mercantile Agency Oompany.Linjited, lo five itself from its present embarrassment, aud I have myself discussed the aspect with a commercial man hero of some considerable experience in financial matters. He says that he thinks that (he placing of the unallotted 20,000 shares on the market as preferential stook would be the I readiest and best way out of the difficulty. You see, although the Company is formed oi 180,000 shares of L 25 each (L2 10s paid up) only IGO.OOO of these shares have been " placed " so far. The balance, therefore,' could now bD floated with the condition that each share should bo fully subscribed. This step would practically find the sum (about L 500,000) necessary to carry on business with, and might altogether avoid the necessity of a oall being made on the present shareholders. Tho inducement to the public to subscribe would, of course, be the faot that the new issue would take preference over tho old ordinary stock in every beneficial respect, coming only second to the claims of Debenture* holders. With tho valuable and extensive business connection possessed by the New Zealand Loan and Mercantile Agency Company, there Bbould be little difficulty in placing these shares.

In August, 1892, it was announced that ihe Company with its recent issue of debentures in London had exhausted its authorised borrowing powers, Another pertinent reference 10 the liability of shareholders is also worthy of close attention, especially at the present timo, in the bearing it has upon'the fortunes of existing shareholders. It "was contained in the Chairman's speech at the last annual meeting in February, and is best made known to you by a reproduction of the precise words used on the occasion, The Chairman said :

"The liability of 12210s per share on our ordinary shares haa frequently beeu subject-matter of comment, and a desire has from timo to time been expressed that steps shoald bo taken to diminish the same. While the wishes,so expressed have-1 need hardly awura you -had full consideration by your Directors, the end in view has been prac tically attained by the following method :—By mortgaging the uncalled capital to Trustees for tho Pebenturo Stock, which is not redeemable until 1953, a Bafo-juard is placed in your hands which did not previously exist, becauso it is only towards the redemption of that stock that you can bo called upon to meet the liability which as shareholders you incur. The Debenture Stock-holders oil the other hand, in this mortgage of the uncalled capital of the Company, possesses an earmarked security never previously enjoyed,"

This places a curious and perhaps hardly thoroughly realised complexion on the matter. It means, as I judge, that the Debenture-holders possess the key to the position, as by the suspension of the Company all debentures can be regarded os becoming immediately duo, muoh as would occur in the caao of promissory notes when a private individual becomes bankrupt. This being bo, and the whole of the unoulled capital being already under mortgage to Debenturo-holdei's it follows that they would best seek their own advantage by insisting on the floating of the unissued shares before referred to and so procuring the money required to carry on with, rroin, as much as possible, a new source, It is hardly likely—indeed, it is absolutely improbable—that Stock-holders will, as lias been suggested permit of a call of £3 per Eharo being' made with the intention of throwing the proceeds into the current working fund of the Company, When they havo the power, as from what I can gather,tbey undoubtedly possess, to insist on the wholo unsubsoribed balance of £22 10s per share being called up, and of claiming the monoy thus acquired, thsy would be unwise to permit their security ; to be sapped by a partial draft being made upon it; even though it was inado a contingent condition that tho sum raised by the call should bo supple* mentod by the addition of a similar or greater amount to the capital account by the issue of preferential shares, •The combined measure, to my mind, is hardly likely to be adopted—although on this point opinions differ—but the simple plan of issuing extra shares, with preference, without any call at all being made, seems obviously the way out of the difficulty if it can be arranged, However, in a few daysno doubt our cable news will tell us what we all want to know, and as there is bound to be every disposition on the part of debenture-holders to preserve and develop so valuable a business as that tho Now Zealand Loan and Mercantile Agency controls, no arbitrary or unnecessarily harassing conditions aro likely to be thrown in 'the way of the Directors' endeavour to reconstruct,

As an indication tliat the prospects are not gloomily regarded in this Colony, I may mention that, there is some " nibbling" going on in the shares tins morning—certainly at a very low figure; but still are quotable atsomething. (By Telegraph.) Wellington, Saturday, • I am again told that the N,Z. Loan andM.A. Company cannot poasibiy make calls upon its shareholders for present current requirements. The only available plan is for debenture holders to consent to consolidation of debentures and the ronewal of them all—short>time terminable ones as well—so as to fall duo together in sixty years, 1953. Then money ,can be raised, as I have Baid in my articlo, on the issue of the balance of the shares «8 preferential stock,

It ib plain that although (he Com* pany had only called up £2 10s per share, it worked up to a £25 per share pressure on borrowed capital, the reason for obtaining money on debentures being, of course, the fact that at i por cent, or whatever it was prooured at, it «m the most profitable course to adopt. Now the trouble has come, and there is no margin left—everythipg is pledged; There is a resource, however, as I have indicated, and that will have to be availed of.

The share market in Wellington in general is stagnant. If anything there has been a slight drop, which was only to be expected under the circumstances, National Mortgage, N.Z. Insurance, and Bank, of New Zeala'ud shares are each a little lower, •One wonders, by the way, ;how. the N.Z; Loan and M.A, Company manparry on \ their business ih% the n^anlpe,.;^

in the long run as soon as " reformation "-this is the latest saes everybody Gxpecls, but what authority do the; possess as an institution in "a state of suspense" for payments of any kind in tho present, and what Bank is making them, irinformation whioh would muoh en- ' lighten me.