New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1916-11-12

privilege OF the stats 10 reuoo"
NJ par. certain economists pretending
that as the state was not bound 70
pay the principal at . certain oa'e,
IN. ,tats conversely could not eompe'
Tho investor to accept redemption ~
par. unless no Voluntarily chose TO &c
so. This privilege Of the state to re-
d.em tho rente at par at hIed ds'e
4, now no longer open 70 discussion
a. Il "a established by custom and
recognized by law. and Is Invariably
N. basis Of any conversion which may
be undertaken.
What Is meant by conversion OF tn'
ren.e after fifteen years1
Conversion Of the rente means
simultaneous offer Of redemption a.
par. or, a. tho option Of the holder
the exchange Of the old rente for
new rente bearing a lower rate OF In
t.r.st This, Of course, is only pos
,,bls II tho current yield, based or
tia market value Of government Sc
curities, is below the rate OF interest,"
maid on the security intended to De
converted and II the value OF the ne"
rente offered, capitalizins tho rate oil
interest, Is over par
Tho interests Of the state and Of
N. subscriber are similar. Tho in
vestor wants his investment TO IN,
crease in value and to have tho bono
for which he has subscribed at foi
example, SIN, 60 over par, and the
state wishes the same bond to go over
mar in order to be able to redeem the
old issue and replace 1t by new bono
al a lower rate Of interest IL az
per cent bond, for example, is wor''
more than par, then the state oher'
the holder Of the old per cent bono
the choice of par in cash or OF ne"
~ DOR cent bond in exchange. Tn'
investors In the original issue wou'c
get their profit on their original IN
y.,tmsnt, and the state gets It's prom
nv tho decrease Of the amount OF III
actual disbursement in the payment o.
interest, and both are happy.
Now, to say that q bond cannot d
converted or redeemed before Ger
tain date, which in the case OF th'
issue now under consideration Is tn
year 1881, means that II the borrow
ing rate Of the government improves
before that date the investor will SUI
have, for several years to run, th'
benefit Of the high return OF interest
suppose, for instance, that q Frencf
4 mar cent rente should be worth par
the s per cont rente, having still ter
vcars 10 run before being redeemabi'
or convertible, will thus be worth par
nlus tho actual value Of the D PEI
cent interest return for that period
which Is about 1Os. Therefore, the non
eonvcrtibility or non-redemption De
fore a certain date may eventually be
come very valuable. 1t is interestint
70 note that the present ISSUE as
bavo already stated, cannot be con
vsrt.d or redeemed for fifteen years
while In previous instances the con
version has taken place at mucf
shorter periods.
A, an illustration Of what has hap
p.ned in the past, in 1871, aftei
France had been beaten by Germany
in tho Franco Prussian War, 3 pei
can't rentes were issued at 82h pei
cent In 1874 they sold as high a.
par and a half; In 1875 they rose te
1O7. and in 1881 to 121. In 1883
twelve years after issue, they were
converted into AZ per cent rentes
which sold at about 1921 the same
year. In 1894 the ~ per cent rente'
were converted into 8h per CEN
rentes, which sold the same year a
over lot.
In France tho subscription to the
new loan has been opened all over thu
country In agencies Of the Bank o.
France, with banks and bankers ant
in all government, treasury and fsca
agencies. We have learned from pri
vate sources that there IL an enormous
number Of applications, the subscrip
ton being essentially q popular one
Precise returns will not be available
until several days after the subscrip
tions arc closed.
In the United States, looking at thu
subscription list, there are three IN
teresting features: First, the broad
response by the French colony; sec
ond. the extraordinary number OF sub
scriptions for comparatively small
amounts, and, third, The large size Of
certain individual subscriptions.