821.51 Mortgage Bank of Colombia/66

Memorandum by the Chief of the Financial Division (Livesey) to Mr. James H. Wright of the Division of the American Republics

Mr. Wright: I have looked over the texts supplied by Ambassador Turbay appertaining to the offer to be made by the Agricultural Mortgage Bank. It will offer 3 per cent bonds of the Government of the Republic of Colombia which are already outstanding and listed on the New York Stock Exchange in amounts ($1100 face value of Government bonds for $1000 face value of guaranteed bonds and $750 face value of Government bonds for $1000 par value of nonguaranteed bonds) which at yesterday’s closing price on the New York Stock Exchange for the Government bonds would give a market value of $407 for every $1000 guaranteed bond and $277.50 for every $1000 non-guaranteed bond. Of course the bonds to be surrendered have some ten years of unpaid coupons attached but still I think the offer will leave holders not too dissatisfied.

One irritant to holders will be that in almost every case they will have to receive “Certificates” for the parts of the $1100 and the $750 of Government bonds which cannot be paid in bonds of $500 or $1000 par value. They will have to sell these certificates or buy others over the counter to make up $500 amounts which they can convert into Government bonds, or else wait until 1945 and then be paid in cash drawn from the proceeds of sale of the Government bonds not theretofore claimed under the Bank’s offer. This will be a nuisance but there is no help for it. The low price at which these certificates (which are not listed on the Stock Exchange) will sell will somewhat diminish the above stated market values of the offer so far as concerns most holders.

Any statement the Department makes in support of the offer need not touch on these particulars. A statement of approbation or gratification in very general terms seems entirely warranted and likely to be in line with the reaction of bondholders and the interested public to the offer. The persons who will remain dissatisfied are the holders of Colombian departmental and municipal bonds who still await in vain for any offer from the debtors. In this connection it will be noted that the offer is entirely in the name of the Agricultural Mortgage Bank and that any statement which the Department may make relating to the good offices of the Colombian Government [Page 221] in bringing about the offer should be phrased to attribute credit but not responsibility.