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Secretary of State cannot recommend a loan from Colonial Development Fund, for such loan could only be made to Government of Federated Malay States, which would be responsible for its repayment. It was understood that the Company must have not less than £150,000 to meet its January liabilities. The meeting considered that this sum could only be raised if the affairs of the Company were placed in the hands of a Receiver, who would be able to borrow money ahead of the Guaranteed Debentures. A letter was accordingly addressed to the Directors of the Company stating that the Secretary of State was unable to see any alternative to the appointment of a Receiver, but that he would arrange a conference with the Directors who would be at liberty to make any proposals for securing the necessary finance which did not depend on financial assistance from Treasury, Colonial Office, or Colonial Development Fund. Conference was held to-day over which I presided. All Directors of Company were present, also High Commissioner and repre- sentatives of the Colonial Office and Treasury. The Directors proposed that Prior Lien Issue at 5 per cent. should be authorized up to amount of £400,000 of which £250,000 would be issued immediately and the balance held in reserve. They also proposed moratorium as regards Federated Malay States Loan and 7 per cent. Partici- pating Debenture Stock. i.e., interest would accumulate as a debt for four year from now, and Sinking Funds, except in first Debentures, would be postponed for four years from 1934. This Prior Lien Liability would have precedence over Federated Malav States Loan. The Directors hoped that the moratorium plus the sum of £250,000 would provide for working capital and deficit on Guaranteed Debenture interest for the next four years, and that by then with improved trade conditions the Company would be able to meet its liabilities.
Directors are strongly opposed to appointment of Receiver for several reasons, chief of which are that they represent that effect on Company's prospects of obtaining fresh business would be bad, and that administration by a Receiver would be difficult and expensive and would involve detailed supervision by the Court. Treasury have this proposal under consideration, and if their consent should eventually be given, it will be subject, probably, to modifications in point of details, one of which may be that although £400,000 borrowing powers will be obtained in order to provide for possible future requirements, actual borrowing will only be allowed up to the amount from time to time required and approved by Treasury and Federated Malay States Government. The following stipulations would also certainly be made:-(a) resigna- tion of all Directors; (b) appointment of new Directors, representative of Treasury, Federated Malay States, and existing Company with Government majority on the Board; (e) drastic reduction of expenses in this country and Malaya; and (d) possibly also purchase of stores for Company through Crown Agents.
It is thus hoped to secure practical advantage of appointment of a Receiver with the least shock to the Company's credit. Please consult immediately Finance Com- mittee of Federal Council and telegraph whether it approves in principle. and is prepared to leave details to be arranged with the High Commissioner. It should be impressed on Finance Committee and all concerned that these negotiations must be kept secret for the time being.-PASSFIELD.
C. 72367/A/30 [No. 155].
No. 8.
THE ACTING HIGH COMMISSIONER to THE SECRETARY OF STATE. (Received 11.46 a.m., 17th December, 1930.)
TELEGRAM.
17TH DECEMBER. Confidential. Your telegram of 12th December, Con- fidential. Perak Hydro-Electric Company. The Finance Committee agree in prin- ciple to the proposal(s) subject to the stipulations (a), (b), (c), and (d) but urge the inclusion of a further stipulation that there should be a local Advisory Board, or preferably a local Board of Management. I concur and consider that such a Board would be of assistance to the Manager in connexion with local matters, prices, rates, wages, &c.
* No. 7.
C. 72367/A/30 [No. 169].
No. 9.
THE SECRETARY OF STATE to THE HIGH COMMISSIONER.
(Sent 10 p.m., 30th December, 1930.)
TELEGRAM.
[Answered by No. 11.]
CONFIDENTIAL. No. 157. Federated Malay States. Following modified scheme for Perak Hydro-Electric was discussed at meeting at Colonial Office on 29th December :-
Begins(1) The holders of the 5 per cent. Guaranteed Debenture Stock of the Federated Malay States Government Loan and of the 7 per cent. Partici- pating Debenture Stock, to agree to the creation by the Company of Prior Lien Debenture Stock to an amount not exceeding £400,000.
(2) This Prior Lien Debenture Stock to be issued from time to time as and when money is required by the Company. Not more than £200,000 of this Stock to be issued immediately. The proceeds to be paid into a Special Account. All expenditure out of this Special Account to be subject to the prior sanction of the Treasury, and to be applied only for the following purposes:-
(a) To the payment of existing creditors;
(b) To the payment of interest and Sinking Fund on the 5 per cent. Guaranteed Debenture Stock so far as these amounts cannot be met out of the Gross Income of the Company on Revenue Account;
(c) To provide for any necessary working capital or additional capital expen-
diture approved by the Treasury.
(3) The Prior Lien Debenture Stock to be arranged so as to carry interest
at 5 per cent., to rank in front of the 5 per cent. Guaranteed Debentures, and to be redeemed by 1st August, 1951. by means of a cumulative Sinking Fund commencing on 1st August, 1936. or on such other terms as the Treasury may approve.
(4) The arrangements for the placing and issue of the Prior Lien Debenture Stock to be subject to the consent of the Treasury.
(5) All interest on the Federated Malay States Loan and on the 7 per cent. Participating Debenture Stock falling due on and from the 31st of January, 1931, to the 1st August, 1934, both days inclusive, is to be payable to the extent only that net earnings (as defined in paragraph (8)) are available for the purpose. Payment is to be cumulative so that the deficiency in any one or more half-year during the said period can be made up out of the net earnings subsequently available during that period. No Sinking Fund contributions to be made on the Federated Malay States Loan until 1938, when Sinking Fund contributions will become payable sufficient to redeem the Stocks on the 31st July, 1965 (4 years after the present due dates). The Sinking Fund contributions to be made on the 7 per cent. Debenture Stock shall be similarly postponed until on or after 31st July. 1938, or such later date as the Company may arrange with the consent of the Federated Malay States Government.
(6) The net earnings of the Company for each of the 4 years ended 31st July, 1934, shall be appropriated as follows and in the order stated :—
(a) In payment of interest at the rate of 5 per cent. per annum on the Federated
Malay States Loan together with any cumulative arrears;
(b) In payment of interest at the rate of 7 per cent. per annum on the 7 per cent. Participating Debenture Stock, together with any cumulative arrears; (c) Any balance remaining to be carried to General Reserve or carried forward. (7) In each year beginning from 1st August, 1934, the interest set out in (a) to (c) hereunder shall be payable, and the net earnings of the Company shall be applied as follows and in the order stated:---
(a) In payment of interest at the rate of 5 per cent. per annum on the Federated
Malay States Loan;
b) In payment pro rata of any cumulative arrears of interest on the Federated Malay States Loan and of current interest at the rate of 7 per cent. per annum on the 7 per cent. Participating Stock;
(c) In payment of any cumulative arrears of interest on the 7
Participating Stock;
per cent.
(d) Any balance remaining to be applied as the Board of the Company may
direct:
Reference -
NC.O.882/12
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| PUBLIC RECORD OFFICE, LONDON|
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