Evening star., 1947-05-04

- $50 SSs>~~~~s - FAAs~sS SNEASSA 49,
he worlds economic reconstruction
formed but also have special re-
sponsibilities toward the individual
who, in the last analysis, put up
the cash for their lending activ-
tiles. Therefore, the success or
failure Of foreign offerings on the
American money market depends
upon the Judgment OF institutional
buyers rather than upon small
investors.
That our investing public is not
prejudiced against foreign bonds in
general was proved by the success
Of a Commonwealth of Australia
bond issue last summer, followed by
the absorption OF two considerable
Australian refunding operations.
However, that was no logical yard
stick by which to measure the atti-
tude of our private money market
toward European offerings. The
Norwegian loan thus became a test
in the vital European field.
Credit Always Good.
1t should, of course, be understood
that this loan was highly selective.
Norways credit rating has always
been Al. Its financial record is
fawless, while the character of its
people and their code of business
ethics reduce the moral risk" to
minimum. To be sure, the five-year
period of German occupation from
the spring Of 1910 until liberation
from the Nazi yoke in May OF 1945
inflicted grave losses of every de-
scription and distorted Norways
normal economic pattern. Never
theless, the amount Of actual war
damage was not excessive, while
the record of economic reconstruc-
ton in the scant two years since
liberation is surprisingly good.
Norway is for the most part a bar
rem land, its magnificent mountains
and enhancing fjords yielding little
except scenery, which could not be
capitalized on after the war killed
the lucrative tourist trade. Never
theless, Norway has several major
sources OF national wealth. First
and foremost comes its merchant
marine, which normally ranks high
among the worlds carrying trade.
Although the Norwegian merchant
feet suffered heavy losses during the
war, most of it escaped capture by
the Germans, and already replace
ments have gone far to fill the gaps
and promise to restore 1t to pre-
war levels within the next couple of
years. AS adjuncts to the merchant
marine are the important whaling
and fishing fleets, both of which
are back almost to full productivity.
Norway's chief internal asset is its
abundant water power, the source
of hydroelectric energy for much of
its industry.
Expansion Planned.
Plans for new hydroelectric
plants and industrial expansion are
one of the main reasons for the
present loan, since much of the
equipment, machinery, and machine
tools must be purchased in the
United States, thereby necessitating
a Strengthening Of its dollar ex-
change. To be sure, Norway's dollar
requirements far exceed the pro-
ceeds of the present $4,000, 900 loan.
But Norway's economic life is basic
ally so sound and is recovering so
rapidly from the wartime ordeal
that the servicing of this relatively
modest borrowing should not impose
any real financial difficulty.
The very terms Of the loan show
that 1t is not in the "necessitous"
class. The rate of interest is 3lk
per cent, though the bonds will yield
about $40 per cent to maturity,
since they were publicly offered at
981z. This is a rate substantially
less than that charged by the World
Bank. Indeed, Norway has neither
made nor contemplates an applica-
tion for a World Bank loan. 1t
relies confidently upon the private
money market to obtain the foreign
funds it needs. And this confidence
was rewarded by the success of the
current bond issue, which was fully
subscribed within a few hours after
the books were opened. Although
detailed analysis of the subscrip-
ton list is not yet available, it is
understood that commercial banks
and large institutional buyers ac-
count for most Of the total.
A Healthy Sign.
The success OF this Norwegian
issue, the first borrowing of a
European nation not only since
the war but since 1887, is a healthy
sign. 1t indicates that responsible
capital views the international
scene with sufficient confidence to
make selective investments in the
European field. On the basis OF
that indication, Wall Street is
probably correct in regarding the
Norwegian issue as a bell y
the prelude to other foreign offer
ings of high-grade character
New York underwriting circles are
therefore predicting that the sue
cess OF the Norwegian loan will en-
courage other European govern
ments to go ahead with plans for
dollar-bond flotations which have
been in the discussion stage for the
past year or more. Regarded as
most imminent is the projected bor-
rowing by the Netherlands of $25,-
100000 on the New York market.
1t should, of course, be understood
that even the So1,ndaet of e,,,L