ALTHOUGH American capitalists show no intention at present of investing in China, it is considered in Tokyo that they still regard Japan's credit as good.
This is because an important arrangement between financiers in New York and Japanese electric power interests has been revealed by the announcement that Messrs. Dillon, Read & Ca, of New York have agreed to the transfer of all the property of the Daido Electric Power Ca. of Tokyo to the new Japan Electric Power Generation of Transmission Ca., or nationalized electricity corporation, under the electric power nationalization law passed by the Imperial Diet in 1938. The latter corporation is being established under that law.
'The Daido Company's property was mortgaged as security for two Toans floated in the United States by its seal agents, Messrs, Dillon, Read Ca, with the Industrial Bank of 'Japan' acting, in Tokyo, as trustee For the bondholders.
The total amount borrowed, $28, 00,000, comprised $15,000,000, raised in 1024, with Interest at 7 percent. and to be redeemed in 20 years, and $18,600,000. floated in 1925, with me terest at 65 per cent. and to be redeemed in 25 years, These two loans Fepresent all the company's foreign Indebtedness.
The principals of both loans have eon reduced by periodic payments under the terms of the contracts, with the result that at present $4.- 40,000" Is outstanding against the AArst loan, and $5,090,000 against the second Joan, a total of $9,670,000.
"The Joan contracts stipulated that the property could not be transfer-Feds and anxiety on this score was the basis for criticism of the electric power nationalization law during discussion of the measure in the Diet prior to its passage last year, Negotiations, however," were entered into with the American capitalists, and being carried on in a friendly atmosphere and very. diplomatically by the Japanese interests, Fesulted in success for the. latter. This is regarded with much satistaction in Japanese governmental and Industrial quarters, as they consider it shows "Japan's actual financial stability is Yecognized in the United Stetes, and Messrs, Dillon, Read Co's example is likely to be followed' by other American fiscal agents when the question comes up of transferring the properties of other Japanese electric power companies, which are under mortgage for American loans, to the new national electricity corporation, gapan's Credit not so Bad'
Ik was feared at first in Japan that the negotiations might prove very dificult, or even unsuccessful, owing to the feeling in the United States against Japan over her actions and polley in China, and the refusal, 50 far as is known, to extend Ameri" can loans, or credits to Japan in the present situation, The outcome is, taken as showing that Japan's credit not so bad after all, and Messrs. Dillon, Roud & Cos action is, therefore, ically appreciated, it is stated in high Japanese quarters.
The entire property of the Daido Bleetrie Power Ca. will be taken over by the new electricity corpers tion on April 1, 1999, along with the Toan contracts, Payment of prine clpals and interest under these con= tracts will be guaranteed by the Japanese Government, after the transfer. The Daido Company will thereafter practically go out of The total amount involved "is '¥.201,000,000, of. which ¥.120,000,000 represents the 45 per cent. of phyical property which was to have been transferred under the original official schedule.
The new corporation is to take cover the entire plant of the Daido Company, which. is in first-class operating order, on the basis of its original cost. it would cost a. far {greater amount to construct the plant ft the present time, and to build it at all would be diffeult, if not impossible, owing to scarcity of mate-Flals and various war-time restrietons.
On the other hand the Ministry of Communications has agreed to take over the Daido Compan: standing American loan obligations on the basis of the yen-dollar exchange rate prevailing when the loans were contracted. This sacrifice means that the new corporation will shoulder an amount, in principal alone, equivalent. to" over "30 per cent. of the $9,070,000 involved, on the basis of the present exchange rate. Against this, however, is set the value of getting the plant at its original cost, Tt has also been arranged that the entire Daido personal will be trans ferred to the new corporation, thus keeping their employment, and Felirement fund has been. set aside for employees which will go into operation at the end of March, 1940.
in concluding the arrangement the Ministry of Communications took into consideration the fact that the Daido. Company had faithfully carried out its obligations to the American capitalists, thus, materially helping to reserve Sapan's financial credit, in spite of suffering heavy sacrifices in making payments of principal and Interest at a much lower rate for the yen than when the loons were contracted, besides having to pay the Interest at the high rates originally stipulated, Te i recalled that, owing to American sympathy with Japan immediately after the great earthquake of 1923, loans could have been. obtained' then' at comparatively low interest, and some years later also: Tow. rates were obtainable. But a. year or so after the earthquake, when the Daido loans were contracted. 1024 and 1925, and due to the catastrophe, much higher rates, round 7 por cent, were charg-for loans to Japan.
Other Transfers According to the oficial schedule, the Nippon Electric Power Ca. will transfer to the new corporation 40 per cent, of its physical property, the Tokyo Electric Light Ca. 22 per cent, the Toho Electric Power Ca. 10 per cent., and the Ujigawa Electric Power Ca. 30 per cent.
'Under the new Jaw, 182 electric power companies are' to transfer large parts of their properties to the new corporation, with which the latter will be organized. Most of the however, will be furnished 'Big Five" companies, the Daldo Electric Power Ca., Nippon Electele Power Ca,,, Tokyo' Electric Light Ca,, Toho Electric Power Ca., and Ujigawa Electric Power Ca. The contributions of the other concerns will be insignificant, comparatively, The Daido Company, under the omeial schedule, was to transfer 45 per cent. of its physical property, consisting of its main steam plants (not hydro-electric), and its "main transmission lines and their substations, to the new corporation.
Its president and directors, "however, thought it would be wise to transfer the entire property _and holdings of the company. They, therefore, "negotiated to that end successfully with the Ministry of Communications, under whose control the new corporation (Nippon Hassoden Kabushiki Kaisha) is being, established.
Text read from the printed page and cleaned; old type leaves the occasional error.