MESSRS R0THSCHILD AND THE FOUR MILLION LOAN.

Waikato Times, Volume VIII, Issue 447, 30 March 1875, Page 2

MESSRS ROTHSCHILD AND THE FOUR MILLION LOAN.

The following letter, signed "Stock Exchange," appears m the " New Zealand Timess " of March 15 :— Sir, —l think "the " Post" has jumped at a very I false conclusion. The great house of Rothschild are loan contractors, and not loan .agents. I never knew the firm in any other capacity than contractors, in the many loans they have brought on the money market. v < < It will be asked, perhaps, how dp they get an|y advantage if they place the debentures in the hands of the publijcat the same price at wjiich they mak!e the contract f Now, the reply is/that they retain for themselves a certain portion, perhaps a million or a million and a half, on which they will gain a profit of* about 2 J per cent, or' about £22,000 to £30,000, according to the amount of debentures they retain for themselves. This profit I will show further on, and' I think it will be found that the colony really receives 93 net cash. ' On the 12feh of January, previous issues of 4£ per cents were selling at 98£. - This is doubtless correct. The StDck Exchange dealers' (jobbers) were selling at that price, but there is a margin of 1 per cent between buying and selling; so that if a holder of these debentures (I mean one of the public, and not an Exchange man) had been a seller, he would in all probability have got about 97£ ; however, we will say in round nuinb^|fQsi. Now comes a very im|*tai\ fact, which leaves no shadow of doubt. At JkjidJ;he time Mr Vogel made the new 4| per cent losraf there was a dividend for the past half year jujjpulue on. the previous issue of 4J per cent debentures. XThis dividend fell due on the 15th of February —viz, 2J per cent, ergo, after the 15th Feb., the debentures alluded to would be quoted ex dividend. Now, fixing the medium price at 97J on the 12th January, the date named in the Post, it will make the price, on the 15th Februaay, 95 J, ex dividend. This, of course, upset 3 the statement in the Post about a depreciation of over 5 per cent., even if the colony receives 93' net. Now, I look at the matter thus : —Rothschilds, and those who took the portions of the new loan, gave 93, when similar debentures of a former issue were about 95£. This leaves the profit I spoke of before, viz, 2 J per cent. This profit, it must be remem bered, covers a great amount of contingent "expenditure, and a certain amount of risk —always attending transactions of this nature. At home, if the Chancellor of the Exchequer had a large loan to raise, on a creation of consols, he would be obliged to submit to a depreciation of at least 1J per cent on the current market price of consols, and would be content to do so. Let me conclude by pointing out, that like any marketable commodity, debentures, stocks, shares, &c, are liable to rise or fall in price accordino to supply and demand. Now, Mr Yoge 1 had a farge supply to place on the market, and from my experience, I do not hesitate to say that he concluded a most fair and equitable contract. _ > ~\