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The Pamphlet Collection of Sir Robert Stout: Volume 82
(Letter written in Wellington.) Wellington, 29th December, 1884
29th December, 1884.
Sir,—Re proposed purchase of the Waimea Plains railway, I have the honour to inform you that Messrs Bell, Wales, and myself have arranged to return to Dunedin by the Waihora this afternoon, and to express our regret that the terms proposed by the Government are such as my directors could not entertain.
| 1. | The Government to purchase the railway and its equipment at the price of £106,000 in debentures, bearing interest at the rate of 4 per cent. per annum, payable within the Colony during the first two years, and thereafter in London, and to pay the Company the Government quota of guaranteed interest for the year ending 31st March next. |
| 2. | The Company to forego its claim on the ratepayers to the extent of half the amount of rates already levied and to be levied for the current year. |
| 3. | The Company to pay the Insurance Department the sum of £9000 by way of premium on the debentures of the Company in consideration of the Department exchanging them for Government 4 per cent, debentures. |
| 4. | As an alternative proposal the Government will pay for the line in 4½ per cent. debentures, interest thereon being payable within the Colony only, and will arrange that the Insurance Commissioner shall give up the Company's debentures in exchange for those mentioned at par. |
As regards the alternative proposal, it does not appear to us to be any more favourable to the Company than the first one; for 4½ per cent. debentures, with Interest payable within the Colony only, would probably not be exchangeable for 4 per cent, debentures, with interest payable in London, and the probable loss on the sole of the 4½ per cents, would about equal the amount of premium payable to the Insurance Commissioner under the first proposal.
As already pointed out to you the overdue rates and the guaranteed interest for the current year, will enable the Company to discharge all to liabilities, with the exception of the debenture loan (£75,000), and that for the future the guaranteed interest will admit of the payment of a steady dividend of 8½ per cent, on the paid up capital. Such bring the case, it cannot be expected that the Company will entertain a proposal to part with its property on any such terms as those mentioned.
The following will serve to show (approximately) the loss the Company would sustain by a sale on the terms proposed:—
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Thus it will be seen that the amount of paidup capital being £35,610, the shareholders would lose £19,610, and would be selling at a discount of 55 per cent, shares in an undertaking yielding a return of 8½ per cent, per annum,
In conclusion I may say that while the Company is prepared to dispose of its property on fair terms, and such as would probably be regarded as reasonable by the Legislature, the directors cannot recommend the shareholders to consider the above proposal.—I have the honour to be, Sir, your obedient servant,
R, H. Leary, Secretary.
The Honourable the Minister of Public Works, Wellington.