New Britain herald., 1915-10-21
MOST FAVORABLE
 FEATURE OF LOAN
From Investment Standpoint Is
 Conversion Privilege

New York, Oct. 21.-From the in- vestment standpoint the conversion privilege on the s500,000,0 ,000 Anglo French five-year per cent. loan is one of the most favorable features of the issue. This is the opinion of leading investment bankers. By sig nifying a desire to do so on or before April Is, 1920, the holder of the i've year securities can convert them at any time up to maturity into joint bonds of the British and French gov ernments, bearing 1-2 per cent. in- torest and running to October 15, 1o40, but redeemabIe at the option of the governments on or after Oc- tcber 15, 1880.
 Tn other words, purchaser of present bonds gets a joint and sev- eral obligation of Great Britainu and France that will pay per cent. in terest for five years and 1-2 per cent. for at least ten years more, and he has the option of taking back his money at the end of five years with 2 per cent. added, which would in- crease the return on his investment for that period to nearly 1-2 per cent. a year The yield on the 1-2 Der cent. bonds, which he could take, at the present price of 9S would be approximately 4.75 per cent.
 Great Value Seen. ..-.
 Looking at it from more specu- lative viewpoint, great value can be seen in the conversion privilege In the fact that it gives practical as- surance to the purchaser of the present bonds at war prices that he will have the advantage of peace market before the obligation natures. The securities, being several as we'll. as joint obligations of the two. gov ernments, should enjoy the highest credit reached by either of them within the next fifteen years. With in that period the war and its effect on interest rates can reasonably he expected to have passed. and govern ment bond prices can be expected to compare favorably with those before the war which were the lowest for over twenty years.
 In regard to the future value of the five-year per cent. Anglo-French bonds, a prominent banker at the head of the syndicate said: "The best basis for figuring the probable future value of these bonds in time of peace, or the 1-2 per cent bonds into which they may be converted. is not English consols at IA, paying 3-4 per cent. interest because there were special reasons for that high price; but French per cent. rentes. which in times of peace sell in the sos, or on a IA per cent. basis around 95."
 Price We'll Over Par.
 Adopting this conservative basis for an estimate of the future value of the bonds under peace conditions, 1t is found that price we'll over par may be quite possible. In every year between 1889 and 1918 French rentes sold above 95; in 1897 they went as high as 105 1-4. At s5 they return ed 3.15 per cent. A fifteen-year { 1-2 per cent. bond to return the same yield would have to sell at 116. As the new bonds approach maturity, or their redeemable date in 1880, how ever, they would sell nearer par and yet give the same yield. Their price nVe years hence, when the war will probably be over and some of its ef- fects passed, would be III 1-2 to yield 3.15 per cent. When the bonds have but five years to run they would sell at 106 to return the same yield.
 Even at the low price of 8S IA for rentes in 1912-the lowest price in over two decades-the corresponding level for a 1-2 per cent bond with ten years to run would be 1O9 IA. and at five years from maturity would hc 105. At the 1913 lower price of SS.45. which can now be said to have reflected the coming war, the cor responding price for ten-year 4 1-2s would still be 107 3-4 and for n five year bond about 104 IA.