Sessional_Paper_1894 — Page 419

415

No. 34

30

HONGKONG.

CORRESPONDENCE RELATIVE TO THE CONVERSION OF PART OF THE 4 PER CENT. DEBENTURE LOAN OF £200,000 OF 1886

INTO 3 PER CENT. STOCK.

Laid before the Legislative Council by Command of His Excellency the Governor.

No. 68T

SIR,

DOWNING STREET, LONDON,

2nd March, 1894.

With reference to your letter No. 923 of the 30th June last relative to the Conversion of the Hongkong 4 per cent. Debenture Loan of £200,000 into 3 per cent. Stock, I have the honour to enclose three copies of an advertisement* calling in these Debentures for Redemption and offering terms of Conversion into 3 per cent. Stock in respect of £140,000 of the Loan. This advertisement appeared in the Times on the 28th February, and the 1st instant, the latter date being in accordance with the terms of the prospectus of the Debenture Loan relating to redemption. It has also been widely circulated amongst the holders of the Deben- tures, Bankers and Stockbrokers.

2. The conditions more materially affecting this combined transaction of Conversion and Redemption are as follows:-

(a) The £200,000 Debentures must be redeemed 13 years hence, but

may be redeemed at any time by notice.

(b) The Investments in the Sinking Fund of the Debentures will repre-

sent in September next a value which we estimate at £58,600. (e) The accumulations in this Fund can, under the terms of the Deben. ture Loan Ordinance be applied only in connection with a scheme for the redemption, or extinction, of the whole of the Debenture debt.

(d) The 3 per cent. Inscribed Stock has a possible currency, on the basis of the investment of its Sinking Fund at 3 per cent. of 49 years from the present date, but the Sinking Fund contribution does not commence until two years hence.

3. Bearing these conditions in mind, it will be seen that if the Debentures are converted into Stock at par the Colony will make certain savings during the 13 years which the Debentures would have run if they had not been converted, mainly in the form of a lower rate of interest and the discontinuance of the Debenture Sinking Fund contribution for the two years which have still to elapse before the Stock Sinking Fund commences. Against these savings have to be set the yearly charges for interest and Sinking Fund on the Stock issued on Conversion, and as these charges would have to be met during the 36 years (49-13) the Stock Sinking Fund would require to accumulate after the original Redemption date of the Debentures, it will readily be understood that the substitution of Stock for Deben- tures on such terms would eventually entail a pecuniary loss on the Colony, for which the indirect advantages of uniformity and a somewhat more important line of Stock might be an inadequate compensation.

* Not printed.

The Honourable

THE COLONIAL SECRETARY,

&c.,

&c., Hongkong.

&c.