863.51 M 82/–
Mr. R. C.
Leffingwell of J. P. Morgan & Co. to the Secretary of State
New
York, October 18,
1927.
[Received October 19.]
Dear Mr. Secretary: Confirming my statement
over the telephone, the Austrian Government has in contemplation the
flotation of a
[Page 451]
loan or loans
in the amount of 775,000,000 schillings or about $110,000,000. The
purpose of the loan is to provide funds which, with some contribution
from current revenues, are estimated to suffice for the completion of a
five year program for the electrification of the Austrian railways
(which was set under way from the proceeds of the Austrian
reconstruction loan of 1923 and from budget surplus), for the erection
of telephone cables and the improvement of highways, etc. It is intended
that the loan be offered in this country and in England and in the
important Continental markets to evidence international solidarity in
behalf of Austrian reconstruction.
We have been asked by the Austrian Government to issue the loan in this
country and we have indicated our willingness in principle to study the
matter, but it is still in its preliminary stages and nothing has been
settled.
The loan has already received the tentative approval of the Committee of
Guarantor States which guaranteed the Austrian loan of 1923. The
Trustees of that loan have been informed of the project and have
expressed their wish to be kept advised. We understand the proposal will
also be submitted to the Reparations Commission.
It is proposed that the new loan be secured by a second lien, subject
only to the loan of 1923, on Austrian customs and tobacco receipts and
on such other revenues as may be necessary, and that reparations and
relief claims be subordinated to it and postponed until after its
repayment, as in the case of the loan of 1923.
There will doubtless be presented to you by the Austrian Government in
due course, if indeed it has not already been done, a request that, as
in the case of the loan of 1923, Congress subordinate the relief lien of
the United States to the second charge now proposed to be granted and
postpone its relief claim for a period extending beyond the maturity of
the new loan, which would be say twenty-five or thirty years from the
date of issue. There will also arise the usual question whether for any
reason the Department of State interposes any objection to the proposed
loan.
I do not mean by this letter to ask for a ruling from the Department of
State on a question which will thus be presented to it through official
channels. My purpose in telephoning you, and in writing you in this
detailed manner in accordance with your request, is only, as always, to
keep the Department promptly advised of foreign loans in
contemplation.
For convenience of reference I enclose a copy of the decisions taken last
week by the Committee of Guarantor States and the Trustees of the loan
of 1923; of the joint resolution of Congress approved April 6,
1922,15a and the announcement of the Secretary of
the Treasury concerning
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his
action thereunder;16 and of the
prospectus of the loan of 1923.17
I am [etc.]
[Enclosure 1]
The President of the Committee of Guarantor
States (Alberti) to the Austrian
Minister of Finance (Kienböck)
Sir: The Committee of Guarantor States have
considered the request of the Austrian Government for their approval
under the Geneva Protocol II, of a new Austrian Loan for productive
capital works. They have had the advantage of receiving in addition
to the written memoranda furnished to them, verbal explanations from
the representatives of the Austrian Government. They have also had
the advantage of consultation with the Trustees of the Austrian
Guaranteed loan 1923.
The Committee have been informed that the Austrian Government do not
propose to raise any other foreign loan during the period of five
years covered by the present loan programme; and that it is the
intention of the Austrian Government to apply to the proposed loan,
some part of which will be raised in Austria itself, the principle
recommended in 1924 by the Financial Committee of the League of
Nations that revenue producing undertakings such as the post,
telegraphs and telephones, and the railways, will recoup to the
Austrian Treasury the charges for interest and amortization on such
part of the proceeds of the loan as may be allocated to them.
They understand that the Austrian Government will further make
available for productive investments during the five years 1928–1932
inclusive certain sums out of the current Budget revenue.
The Austrian Government will further make such written application to
the Trustees of the guaranteed loan 1923 as may be necessary under
the terms of the general bond of that loan: and they propose in due
course to apply to the Reparations Commission and the States holding
Austrian relief bonds for the necessary assents of those
authorities.
In these circumstances the Committee of Guarantors acting on behalf
of the States whom they represent, raise no objection in principle
to the issue by the Austrian Government of a loan for an effective
sum not exceeding 725,000,000 shillings for the revenue producing
purposes of the Post Office and Railways indicated in the statement
submitted to the Committee, and have authorized their
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President, when the actual
terms of the issue are communicated to him by the Austrian
Government, to give on behalf of the Committee their final approval
under Article 7 of the Protocol.
I am [etc.]
[Enclosure 2]
Declaration of Trustees of the Austrian Loan of
1923
The Trustees have heard the interesting exposé made by the Austrian
delegation and taken note of the statements made by Doctor Schuller
concerning the projected loan; as regards this loan the Trustees
consider that they are not concerned to express an opinion unless
they consider that the projected loan is likely to be prejudicial to
the Austrian Government guaranteed loan 1923/43. Therefore, when the
terms and conditions of the loan are further advanced the Trustees
will be notified in time to enable them to consider whether these
are prejudicial to the interests of the bondholders of the Austrian
Government guaranteed loan 1923/43.
