The Ambassador in Poland (Biddle) to the Secretary of State

No. 824

Sir: Supplementing my despatch No. 628 of August 1, 1938, and earlier reports from this Embassy treating of the conversion of Polish [Page 647] dollar obligations, I have the honor to forward herewith a copy in translation of a Decree of the President of Poland dated November 18, 1938,21 authorizing the conversion at 4½ per cent interest of the bonds of the 8% Dollar Loan of 1925, popularly known as the Dillon Loan.

This Decree, which became effective on November 24, 1938, the date of its publication in the official Journal of Laws, provides for the conversion of outstanding bonds of the loan with the interest rate reduced to 4½ per cent.* This new rate is to be calculated on the par value of the bonds plus the redemption premium of 5 per cent which was established at the time of the emission of the loan.22

The present conversion completes the conversion of Polish dollar obligations floated in the United States.23 It will affect bonds to the par value of around $8,376,600, since bonds of the loan to the value of approximately $9,825,400 were converted into internal zloty securities of the Polish Republic.

Respectfully yours,

A. J. Drexel Biddle, Jr.
  1. For translation of this decree, see Annual Report, 1938, p. 936.
  2. Earlier conversions were carried out on the basis of laws passed by the Polish Parliament but this conversion will be on the basis of a Presidential Decree. Since Parliament was not in session at the time the Decree was issued, it will have the same effect as a parliamentary law and authorization contained in the Decree is as complete as if made by a law. [Footnote in the original.]
  3. That is to say, a $1000 bond would receive 4½ percent interest on $1050, or at the rate of 4.725 percent per annum on a $1000 bond. For the text of the definitive Polish offer of June 30, 1938, regarding this issue, and a statement by the Council on the same day, see Annual Report, 1938, pp. 880 ff.
  4. By another Polish Presidential decree of November 18, 1938, the interest was reduced on the Land Credit Society of Warsaw (Land Mortgage Bank of Warsaw) Gold Bonds of 1924 from 8 percent to 4½ percent. The smaller portion of this issue received the guarantee of the Polish Government, and was sold in the United States. At the same time, certain minor issues held by British investors had interest reduced to 5½ percent. In despatch No. 827, December 1, 1938, the Ambassador called attention to “this further instance” of the difference in treatment accorded American and British creditors by Poland, as “the Polish authorities are in this matter pursuing a consistent policy of discrimination against American holders of Polish securities.” (860C.51/1375)