817.51/1746
The Guaranty Trust Company of New
York and J. & W. Seligman & Co. to the Chief of
the Division of Latin American Affairs (Morgan)
New
York, March 11,
1927.
[Received March 12.]
513–27
Foreign DepartmentDear Sir: Enclosed herewith please find copies
of recent cables exchanged between the undersigned and the Manager of
the National Bank of Nicaragua, Inc.38 in which the Manager of the Bank transmits the
request of the President of the Republic of Nicaragua for a loan to his
Government and of our response indicating our willingness to extend such
a loan on certain terms and conditions as to security and otherwise, all
of which are fully set forth in the enclosed memorandum. An essential
one of these conditions is that the said loan shall meet with the
approval of the Department of State of the United States.
In connection with this matter, permit us to point out that should the
loan be consummated we propose to charge 1% commission on the maximum
amount of the proposed loan, viz.—$1,000,000.—together with 6% per annum
interest on such amounts as may from time to time be actually advanced
and outstanding.
The undersigned J. & W. Seligman & Co. have recently sold to the
public $8,000,000.–Republic of Costa Rica External Secured Sinking Fund
7% Gold Bonds on a basis yielding to the purchasers about
[Page 430]
7.40% per annum; also
$2,500,000.–7½% Secured Sinking Fund Gold Bonds of the Department of
Cauca Valley of the Republic of Colombia on a basis yielding to the
purchasers about 7.90% per annum, and other loans of similar character
have been marketed by the undersigned and by other banking houses on
approximately similar terms.
The advance which we are now prepared to make is therefore not attractive
to us by reason of the rate of interest thereon nor is the advance for
the purpose of protecting any existing loan or investment, for we have
no loans or investments in Nicaragua. We have, however, been actively
connected for many years with the constructive work that has resulted in
the rehabilitation of the currency, the regulation of the budgetary and
other financial affairs of the Republic, the present method of
collection of the Customs and the rehabilitation of the railroad, and,
having confidence in the good faith and rectitude of the Government of
that country, we are willing to do what we can to preserve the labor of
many years which has yielded great benefits to Nicaragua and has been a
source of pride and gratification to us, by helping the established
Government tide over the present period of difficulty without inflating
its currency or parting with any of its National assets at a
sacrifice.
We respectfully request a formal expression from your Department as to
whether or not you approve of the proposed loan.
Yours very truly,
Guaranty Trust Company of New
YorkR. F.
Loree
,
Vice PresidentJ. & W. Seligman & Co.
[Enclosure]
Memorandum for the Department
of State Covering Terms and Conditions of Proposed
Loan to the Government of
Nicaragua
New
York, March 11,
1927.
Loan: The Guaranty Trust Company of New York
and J. & W. Seligman and Co., subject to the approval of the
Department of State and subsequent approval of the Congress of
Nicaragua, will loan $1,000,000. to the Government of Nicaragua for
one year with option of renewal for a further six months for any
unpaid balance not in excess of 50% of the principal amount of the
loan, for a commission of 1% and interest at 6% per annum on amounts
from time to time outstanding and option on future Nicaraguan
financing. Drafts to be drawn on Guaranty Trust Company of New York
and/or J. & W. Seligman & Co., or both, as may eventually be
determined. Interest to be charged from date of payment of each
draft.
[Page 431]
Repayment: The Government of Nicaragua will
guarantee the repayment of the loan with interest from the revenues
produced by the new taxes, subject to prior lien of English Bonds,
authorized by the Congress of Nicaragua in accordance with Law of
the 21st of January, 1927; from 50% of the superavit as determined
on the 30th of June and 31st of December of each year, and from such
dividends as may be declared by the Ferrocarril del Pacifico de
Nicaragua and the National Bank of Nicaragua.
Security: As security for this loan the
Government of Nicaragua will deposit with the Guaranty Trust Company
of New York and/or J. & W. Seligman and Co., or both as may be
determined, the shares representing the total capital stock of the
Ferrocarril del Pacifico de Nicaragua, the National Bank of
Nicaragua, Inc. duly endorsed and, as a further guarantee, will
obtain such resignations from the present Board of Directors of the
Ferrocarril del Pacifico de Nicaragua and the National Bank of
Nicaragua, Inc. as will permit the election of a majority on each
Board from nominees of the Guaranty Trust Company of New York and J.
& W. Seligman & Co.
Disposition of Proceeds: It is understood and
shall be so ratified by the Congress of Nicaragua that the funds
available from this loan shall, except for the repayment to the
National Bank of Nicaragua of $300,000.—plus accrued interest due by
the Government of Nicaragua, be used exclusively for the
maintenance, equipment, purchase of supplies and discharge of troops
on the re-establishment of order and for such other absolutely
essential expenditures as may be necessary for the re-establishment
of law and order in the Republic of Nicaragua and to this end the
President of the Republic of Nicaragua will appoint a Commission
consisting of the Minister of Finance, Manager of the National Bank
of Nicaragua, Inc. and the American Resident High Commissioner,
which will have absolute authority by a majority vote, always
subject to the approval of the President of the Republic in each
instance, to authorize disbursements of funds available under this
loan, and drafts drawn to provide funds for such disbursements must
bear the signatures of at least two members of the Commission and to
become negotiable only on the authorization by the President.
Authorizations: Before any funds are made
available to the Government of Nicaragua all the terms and
conditions governing this loan, provided approval is given by the
State Department, must be authorized by the Congress of Nicaragua
and the Congress must further specifically authorize the Financial
Agent to sign the loan contract with the bankers, and endorse the
stock of the Ferrocarril del Pacifico de Nicaragua and National Bank
of Nicaragua, Inc. in the name of
[Page 432]
the “Government of Nicaragua Minister of
Finance” and deliver such stock so endorsed to the Guaranty Trust
Company of New York and/or J. & W. Seligman & Co. or both as
may be determined.
Guaranty Trust Company of New
YorkBy:
R. F.
Loree
,
Vice
PresidentJ. & W. Seligman
& Co.
