The New York herald., 1875-12-03
The suex Canal


her by the Egyptian government, was actu-
ated by the fear that purchase might bring
victorious Germany once more in arms to her
doors. This, if authentic, seems a far
fetched excuse for blunder which gave
England splendid opportunity-one which
she improved. Without entering here into
the political aspect of the purchase, we may
examine, for the benefit of the mercantile COM
munity, the article which has changed hands.
| The exact number of shares owned by the
Khedive was 176, ,602 The whole number Of
shares in the company is 100000, of the par
value of 500 francs, or 500, each. In pur-
chasing the Khedives' shares for CA, 900, 900,
accordingly, the British government is pay
ingan advance of about ten per cent upon the
par value, if the figures are correctly stated.
The latest French papers show that the
shares are quoted on the Paris Bourse at
considerable premium above the par value
of 500 francs, sales having been made within
the month of November as high as 1850,
premium of nearly forty -four per cent. The
actual revenue received by the shareholders
last year was twelve and half francs per
cent.
The shares of the Khedive, however, as
| compared with the others, draw no divi-
dends until January /, 1895. This is the
result of a contract between himself and
the canal company, made in April, 1869,
whereby he bought back from the company
some of its properties for the sum of
i f6af
the payment of this sum should be made by
detaching from his shares so many of the
semi-annual coupons payable in future
| years as should be necessary to make the
! equivalent thereof, discounted at ten per
| cent. 1t was afterward agreed that the
equivalent should be computed as fifty of
such semi-annual coupons on each share,
covering the period of twenty-five years from
January 1, 1870, to July 80, 1894, both inclu-
sive. Ten per cent is high rate of interest
to enter into such o calculation, and it is easy
to see that low rate of profit must have
been assumed as the probable revenue of
the shares in order to result in SO long
term as twenty-five years. The canal COM
pany made these coupons available as cash
by making them the basis of a special loan by
the issue of what were called delegations
to the number of 120 900. These were
issued at the rate'of 270 francs each, pro-
ducing 30, 400, 900 francs, sum somewhat in
excess of the amount which the coupons
were taken to represent in the transaction
with the Khedive. The profits on the shares
were pledged to pay-frst, interest on the
delegations to the amount of twenty-five
francs ON each second, their reimbursement
at the rate of five hundred francs and, third,
a complementary division of the surplus
profits earned by the shares over and above
the payment of interest and reimbursement.
The delegations were eagerly taken up by
the shareholders and were almost immedi-
ately quoted at a premium. The revenue
derived from them last year, like that on the
shares of the company, was at the rate Of
two and one-half per cent-that is, twelve
and one-half francs on each delegation-and
they are quoted on the Bourse at handsome
premium.
Nineteen years of the term during which
the Khedives shares draw no profit remain
unexpired. If we adopt the mode of calcu-
lating the value of the profits attaching to
shares that was employed in the arrange
ments between him and the company in
1869 it results that the value of the British
purchase is impaired on this account by
about the sum of 91, 000, 900. One re-
port says that the Khedive proposes to
allow interest on the purchase money for
nineteen years This, Of course, would make
good the deficiency in every respect. But
even if he should not do 50 it is clear that
the British government would get their
shares at no higher price than the market
quotation, if it be computed that 19, 100000
francs should be deducted on account Of
the loss of profits for nineteen years from
So, 301 ,000 the value of 176, COZ shares at par.
This leaves 50, 30O, 900 francs as the value of
the property for which the British govern
ment pay 100000, 900 francs or pre-
MUM of forty-four per cent, the premium
at which the ordinary shares are quoted in
the market
The whole capital of the Canal Company is
20O000,OO0 francs. 1T has an outstanding
loan Of half that amount-namely, 100, 000, 900
francs-and no other liabilities save the dele
cations, for the extinction of which special
provision is made as already described. The
actual mechanical cost of the construction
of the canal amounted to almost precisely
the aggregate Of the capital and loan-that
is, 800, 0OO, 900 francs-which must be con-
sidered as fairly representing the value of
the works Other expenses to large amount
were incurred during the course Of construc-
ton, but these were covered by the indem-
mites received by the company from the
Khedive. The company also owns consider
able quantities Of land, the sale of which
from time to time has been expected to yield
an income in addition to the canal tolls.
n,l,o Rr,tirh rnnrchasa tharefnre may be ms