File No. 882.51/759

The British Ambassador to the Secretary of State

No. 406

Sir: I have received instructions from his Majesty’s Government to invite your attention to certain questions which have arisen in regard to the administration of the sinking fund on the Liberian 5% Gold Loan of 1913.

The total amount of this loan issued, I am informed, was $1,558,000.00, of which $158,000.00 was represented by privately issued bonds. As you are aware, the Loan Agreement of March 7, 1912, between the Republic of Liberia and certain New York bankers, provides for the purchase of the bonds for the sinking fund and lays down (Article 5) that the amounts received by the fiscal agents of the loan, applicable to the sinking fund shall be applied, so far as may be reasonably practicable, to the purchase of bonds in the open market.

The interpretation of this provision of the agreement by the fiscal agents (the National City Bank of New York) has been such as to cause the holders of the publicly issued bonds to feel that their interests have not been properly considered. The British bondholders have represented to his Majesty’s Government that, in spite of the provision as to the purchase of bonds for the sinking fund in the open market, as a matter of fact not a single bond of the public issue has been redeemed, and the whole of the purchases, amounting so far to $100,000.00, have been confined to the private issue, of which about 63% has thus been redeemed. I may add that, while there is not at my disposal any certain information as to the holders of the privately issued bonds, it was supposed that a large proportion of this issue was in the hands of German interests.

Of the public issue of $1,400,000.00 the larger part was issued, and is now held, on the London market, and the holders cannot but feel that the methods which have so far resulted in the application of the sinking fund solely to the privately issued bonds are a serious prejudice to their interests, and are also contrary to the spirit of the loan [Page 895] agreement. The loan was not issued and, I am informed, is not quoted in New York, and the purchase in New York of the privately issued bonds, the holders of which have had the opportunity of having the last say as to the price, does not seem to be a fair interpretation of the rule that the sinking fund is to be applied to the purchase of bonds in the open market.

In bringing these considerations to your notice, I have been instructed to enquire whether the United States authorities have any information as to the procedure of the National City Bank in this matter, and, if so, whether the course of action adopted by the Bank meets with their approval.

I have [etc.]

Cecil Spring Rice

[Note: The above note was referred to the National City Bank of New York, fiscal agent of the Republic of Liberia, November 23, 1917.]