825.6374/1168
Messrs. Sullivan &
Cromwell to the Secretary of
State
New
York, June 14, 1933.
[Received June
15.]
Sir: Referring to your letter of May 29th to us
with respect to Anglo-Chilean Consolidated Nitrate Corporation 7%
Debentures,74
[Page 194]
and the suggestion therein
contained that it might be advisable for our clients through a
representative in Chile to present to the Chilean Government their views
with respect to any action proposed to be taken by the Chilean
Government affecting the holders of the above debentures, we beg to
advise you that the banking firms in question have today arranged to
have a representative of the Company in Chile present to the Chilean
Government a protest against a bill about to be introduced by the
Chilean Government in the Chilean Congress. We enclose herewith a copy
of such protest. A copy of such protest has also been sent today to the
Chilean Ambassador in Washington.
In behalf of the banking firms in question, we request that the State
Department instruct the American Ambassador in Chile to take such action
in support of their protest as the Department shall deem appropriate.
Our clients believe, as set forth in the protest that the interests and
rights of the American holders of the above-named debentures will be
seriously impaired by the proposed action of the Chilean Government and
are hopeful that the Department of State will be willing to assist in
the protection of the American interests involved.
If there is any further information which you may desire in the matter,
we shall, of course, be glad to furnish it.
Yours very truly,
[Enclosure]
Certain American Banking
Firms to the Government of
Chile
The undersigned banking firms which issued to the American public the
7% Debentures of the Anglo-Chilean Consolidated Nitrate Corporation
(subsequently assumed by Compañía Salitrera Anglo-Chilena) have only
now had an opportunity to examine the bill which the Chilean
government proposes to introduce into the Chilean Congress providing
for the formation of Chilean Nitrate and Iodine Sales Corporation
and for other purposes. On behalf of the holders of these Debentures
these banking firms wish to state the following views as to the
proposed bill, and to urge that favorable consideration be given by
the appropriate authorities of the Chilean government to the points
raised below, otherwise it is felt that the interests and rights of
the holders of the Anglo-Chilean Debentures will be seriously
impaired.
- Article 10 provides that the payment of a supplement of $1.50
per metric ton of nitrate to the producing companies over and
above the cost of production, as defined in the bill, shall be
subject in effect to the Sales Corporation being able to meet
the service of its bonds over
[Page 195]
and above the payment of the $1.50
supplement. It is our view that this payment of $1.50 which at
best represents an inadequate payment for depreciation and
depletion, should be unconditional for the purpose of providing
some fixed income to the producing companies in order that they
may meet, in some part at least, their prior funded
obligations.
- Article 11 provides that should the producing companies have
received during any calendar year a sum equal to that necessary
for the service of the Sales Corporation’s bonds, 30% of the
excess profits of the Sales Corporation shall be utilized for
extraordinary amortization of the Sales Corporation’s bonds. We
consider that this extraordinary amortization should be
eliminated since a cumulative sinking fund has already been
provided which will retire such bond within twenty-eight years.
It would be very unfair to increase this amortization out of
funds which should be available to pay interest and amortization
on the debt of the producing companies. Under this proposal the
extraordinary amortization would become effective before full
interest would have been paid upon the debt of the producing
companies and before any amortization would be paid on such debt
because the total debt of the producing companies is greatly in
excess of the bonds to be issued by the Sales
Corporation.
- Article 12 provides that the service of the bonds of the Sales
Corporation shall become a contingent contractual liability of
the producing companies. We feel that this places an undue
burden upon the producing companies and that the relationship
thus created between the producing companies and the holders of
the Sales Corporation’s bonds is entirely foreign to that
previously existing between the producing companies and the
holders of Cosach bonds—and is inconsistent with the fundamental
principle of the bill which is intended to separate the
constituent companies.
- Article 15. It is noted that a joint quota of 66.66% has been
fixed for Lautaro Nitrate Company Limited and Compañía Salitrera
Anglo-Chilena, and it is understood that the division of this
global quota between the two companies will be determined by the
By-Laws of the Sales Corporation, which will subsequently be
drawn. We think it absolutely essential to ensure fair treatment
for the interests of holders of Anglo-Chilean Debentures that
provision be made in the law whereby adequate opportunity will
be given to the representatives of Compañía Salitrera
Anglo-Chilena and the holders of its securities to take part in
negotiations looking to the fixing of these quotas.
- Article 30. We feel that the final sentence of this article
should definitely be eliminated, and that no priority should be
given to the payment of inter-company debts except for that part
of such debts as may be determined by the properly constituted
authorities to be
[Page 196]
legally entitled to preferential treatment. The adoption of this
article in its present form would work great injustice to the
holders of Anglo-Chilean debentures.
Lehman Brothers
Bancamerica–Blair
Corporation
Goldman, Sachs & Co.
