868.51 Struma Valley/28

The Minister in Greece (Skinner) to the Secretary of State

No. 746

Sir: I have the honor to report that the protracted negotiations of the Hellenic Government for a loan in the United States have not yet been concluded, and on account of the delay in settling this matter, it seems advisable that I should acquaint the Department with the present state of affairs.

As previous correspondence shows, the government decided last summer to conclude a contract with Messrs. Robert Monks & Company and Ulen & Company, jointly, for the construction of drainage works in the Struma Valley, the expectation being that these works would cost in the neighborhood of $25,000,000. The invitation to submit bids carried with it the condition that each firm must furnish satisfactory assurance of its ability to secure a loan for the government adequate for the carrying on of the undertaking. Thus it came about that the Monks-Ulen group offered Messrs. Seligman & Company of New York as their financial supporters, and when eventually the drainage contract was awarded to this group, it was [Page 40] accepted on condition that the financing should be awarded to Messrs. Seligman & Company. Nevertheless, from the signing of this contract down to the present moment, Messrs. Seligman & Company have not succeeded in obtaining a legal contract with the Hellenic Government, although the Prime Minister has written to the New York firm a letter assuring them that such a contract will be concluded.

At about the time when the Monks-Ulen contract was being signed, the government was looking for a further loan of $50,000,000 for the purpose of completing drainage works in the Vardar Valley, the construction of roads, and the carrying on of Refugee Settlement operations, and had expected to obtain the necessary amount through Hambro’s Bank, which at that time was acting in association, apparently, with Messrs. Speyer & Company and the National City Bank of New York. Hambro’s Bank withdrew its tentative offers to the Hellenic Government, whereupon Mr. Venizejos turned to Messrs. Seligman & Company and asked whether they would be prepared to make a loan, not merely of $25,000,000 for the Struma Valley work, but of $75,000,000, and received a favorable answer. Messrs. Seligman & Company appeared at one time to have come to a complete understanding with the Hellenic Government for this loan of $75,000,000, but before the contract could be drafted and signed, and following upon strong political and other pressure exerted upon Mr. Venizelos, Hambro’s Bank came forward with a new proposition, and their campaign was so effective that about November 1st the government ceased to manifest any interest in the Seligman offer of $75,000,000, which it had solicited, and announced that the Seligman loan would be limited to $25,000,000, the amount originally deemed necessary for the financing of the Struma contract alone. In the meantime, Hambro’s Bank declared to the Hellenic Government that Messrs. Speyer & Company and the National City Bank were no longer involved in their present undertakings in Greece, and this was subsequently confirmed in the contract eventually agreed upon, which showed that Hambro’s Bank was operating in association with Messrs. Erlanger & Company of London.

Messrs. Seligman & Company naturally felt that they were not being treated fairly in this matter. It seemed to them, and to me also, that they were being used simply to bring Hambro’s Bank to terms, the same tactics having been employed when the stabilization loan negotiations were in progress in London. I had a frank conversation with Mr. Venizelos on the subject. He agreed that the situation was unfortunate, but at the same time expressed the feeling [Page 41] that the propositions from Hambro’s Bank presented certain advantages which he could not ignore. He asked whether Messrs. Seligman & Company would be satisfied if they got one-half of the whole contract, and I was able to state somewhat later that this would be satisfactory. Thereupon the negotiations with Hambro’s Bank were pressed to completion, the reason given for this priority being that that bank was prepared to float an immediate loan in London for a portion of the requisite amount, whereas the New York bankers believed that it would not be advisable to make a Greek offering in the United States at the present time, and that the American contract should contemplate an immediate credit for a fixed amount, the bond issue to come later when the American market might present more advantageous conditions.

The contract with Hambro’s Bank has been authorized, by the Chamber, and the bonds will be announced for sale in the London market probably on December 18th. These bonds will be floated at 89 and will net the government 84. The issue will be one of £4,000,000 only, additional amounts to be cared for at some undetermined date. The coming issue will carry a nominal interest of 6%. In the meantime, Messrs. Seligman & Company continue to deal with the government for the conclusion of their half of the loan, that is to say—$37,500,000. When the negotiations come to an end, I shall endeavor to forward, for the completion of the Department’s records, a copy of the final draft with the Hambro-Erlanger group, and also with Messrs. Seligman & Company.59

It is of interest in this connection to mention that Messrs. Speyer & Company of New York, who have been associated with Hambro’s Bank in other undertakings in Greece, have written to me to say that they do not regard the present moment favorable for the issue of a new Greek loan. It may be mentioned also that the Hambro-Erlanger group have proposed a departure from the ordinary practice in financing, in that their new 1928 loan will not be subject to the control of the International Financial Commission, and it is costing the Greek Government two points additional in order that recourse to the Commission may be avoided. There are not wanting plenty of thoughtful people who feel that this will prove to be a costly mistake to the Hellenic Government in the future.

I have [etc.]

Robert P. Skinner
  1. The Official Gazette, vol. i, No. 279, of Dec. 31, 1928, published the ratification by the Greek Chamber of Deputies of the Monks-Ulen contract for drainage of the plains of Serres and Drama in Macedonia (file No. 868.51 Struma Valley/29).