File No. 817.51/874

The Secretary of State to Minister Jefferson


Department’s January 10, 5 p.m. Your January 12, 4 p.m. For your information the Department quotes telegrams exchanged between the bankers and the Council of Foreign Bondholders with a view to making a satisfactory adjustment of Nicaragua’s finances.

Cooper, Secretary of Foreign Bondholders, London: Have been in conference with Department of State of United States who have been in cable correspondence with United States Minister to Nicaragua. Believe following arrangement can be made with Nicaragua in consultation with the Department of State of the United States: All arrears of interest on sterling bonds up to and including January 1, 1917, to be paid in cash out of Treaty money, coupons for the next three years, that is to say, including coupon due January 1, 1920, to be paid as they mature 25 per cent in cash, 75 per cent in funding certificates payable not later than five years from date of issue, certificates to bear interest at 6 per cent payable semiannually in cash, principal of certificates to be payable out of 50 per cent of surplus revenue above say 1,400,000 dollars or such lower [Page 1115] limit as may be determined by the American Financial Adviser to be appointed and when funding certificates discharged such 50 per cent surplus to be applied to payment of arrears of sinking fund on bonds. No new loan by Nicaragua now contemplated or possible but no objection to stipulation such as you suggest on this head. Bondholders’ preferential rights to be maintained and no other claims to receive more favorable treatment than your bondholders. Matter will be pushed with utmost expedition but it may not be possible to close it before two or three weeks as appointment of Financial Adviser and other details will take time. Brown Brothers and Company and J. & W. Seligman and Company will undoubtedly in order to make possible the contemplated arrangements be compelled to waive part of their claim on Treaty money.

Seligman, New York. Telegram received. Please confirm that funding certificates would be paid in five years from date issue in any event and that customs receipts over 1,400,000 dollars or such lower limit as may be determined by Financial Adviser would be applied to special amortization. Essential we should know exactly how Brown Seligman’s claim would be treated during time bondholders are receiving part interest in new paper. Committee of opinion funding certificates would only be saleable at low price and consider funding arrangement should be limited to two years but would agree to three years provided 25 per cent of interest first year, 50 per cent second year and 75 per cent third year paid in cash. Committee think connection United States Government with arrangement should go further than mere consultation and that it should appear on face of agreement that it is made under their auspices or with their sanction. Cooper.

Seligman, New York. Any arrangements such as that proposed will require ratification by general meeting bondholders. Cooper.