839.51/3602: Telegram

Lee, Higginson & Company to the Assistant Secretary of State (Bundy)

As you know our letter to our bond holders will consist of some introductory comments by us, our letter to the State Department and the State Department’s reply. We plan to mail letter this afternoon and would appreciate any suggestions which you care to make with regard to our introductory comments which are as follows:

Despite the difficulties imposed by the severe economic depression during the past 2 years which were greatly aggravated by the destruction caused by the hurricane of September 1930, all interest and sinking fund payments on your bonds were punctually made in full by the Dominican Republic until September 20, 1931. In the case of payments due on the latter date and on October 20 while customs revenues of the Republic were sufficient to cover the interest and sinking fund payments on the loans of 1922 and the interest payments on the loan of 1926, such revenues were not sufficient to cover fully the sinking fund payments due on account of the latter issue which has a lien junior to the earlier issue. The Dominican Republic has notified Lee, Higginson and Company that an emergency law has been enacted temporarily suspending the payment of the sinking funds but has declared its intention to maintain regularly the payment of interest. The emergency law provides that after the interest requirements on the bonds of 1922 are met the balance of the customs revenues shall be paid into an emergency fund to be administered by the Financial Adviser of the Government. The purposes for which this fund may be used are specified and the interest on the bonds of 1926 is given priority over all other purposes. The law further provides that when the receipts of the general funds of the nation again become normal the law shall be annulled. The results to the bond holders are that the interest on their bonds is still secured by a lien on the customs revenues subject only to the cost of collection but that the sinking funds on both issues are suspended until conditions materially improve. As stated in the letter from the State Department to Lee, Higginson and Company which appears on the following page the postponement of the sinking fund payments will necessarily extend the life of the receivership of customs for so long a period as the amortization payments are held in abeyance. We have been in conference with representatives of the Dominican Republic and with the State Department of the United States and have given careful consideration to all plans suggested for meeting the situation. Believing that it is the firm intention of the Dominican Government that interest payments shall continue to be promptly paid and that sinking fund payments shall be reestablished as soon as conditions permit, we believe that the best course for the present is to trust to the good faith of that Government and the good offices of the Government of the United States.

Lee, Higginson & Company