422.11G93/1689
The Executive Vice President and Secretary of the Foreign Bondholders Protective Council, Inc. ( Francis White ) to the Chief of the Division of Latin American Affairs ( Duggan )
[Received July 6.]
Dear Mr. Duggan: I have received your strictly confidential letter of June 30th69 (LA 422.11 G 93/1686) with reference to the question of a possible settlement of the First Mortgage Bonds of The Guayaquil and Quito Railroad.
I very much appreciate your courtesy in sending the Council this full information.
The disturbing element in the matter is the apparent disposition on the part of the Ecuadoran authorities to ignore the American bondholders.
The Guayaquil and Quito Railroad is an American company and its bonds are dollar bonds. It seems likely that approximately half of these are held by British investors. It is true that there are three American bondholders who hold large blocks, but there are many other American bondholders as well. If the Ecuadoran Government [Page 542] concludes an agreement with the British Minister regarding these bonds and then that arrangement is offered to the American bondholders either to accept or reject, the maximum amount to be assigned to the service of these dollar bonds and other details with regard thereto would have been determined without consulting the American bondholders concerned. This would seem to be grossly unfair and discriminatory against these holders. I, therefore, venture to hope that the Department will be so good as to instruct the Legation at Quito to make representations in the above sense.
We have recently had experience with the British where they have made settlements regarding sterling bonds without consultation with the representatives of American bondholders although a similar proposal was to be made for another sterling loan of which a tranche was sold in this market to American investors. In the case of the Province of Buenos Aires you will remember an agreement was concluded with the sterling bondholders and a similar settlement was sought to be imposed upon the dollar bondholders, without their having much to say in the matter. It is going one step further, however, for the British Minister to negotiate a settlement on dollar bonds of an American Company guaranteed by a foreign government to the exclusion of the American bondholders, and I trust that the Department will take such steps as may be necessary to see that this is not done and that an agreement is made only in consultation with representatives of American bondholders.
With many thanks for your help in this matter, I am,
Faithfully yours,
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