THE CUBA R E \' I E W 



CUBAN INVESTMENT BONDS 



CUBAN 5S DRAWN FOR REDEMPTION THEIR UNIQUE POSITiON 



CUBAN-AMERICAN SUGAR COMPANY BONDS 



THE 



The market position of Cuban os is al- 

 most unique for bonds of this class, says 

 the Wall Street Journal, as may be re- 

 deemed at par during any year of their 

 term. Their low for 1911 was 102 Vs and 

 the high 104, yet holders may be called 

 upon to part with them at par. They are 

 the only foreign bonds on the New York 

 Stock Exchange selling higher than par. 



This paradoxical condition of affairs is 

 explained by the fact that Cuban banks 

 and the government of Cuba will accept 

 them as collateral for loans to the extent 

 of 90 per cent of their face value, and con- 

 sequently it pays to hold them even at a 

 premium, and to take the risk that part 

 or all of a holder's investment may be 

 called in. 



Naturally the changes are against re- 

 demption at an}' one time of anything more 

 than a very small portion of one's hold- 

 ings, and their retention is therefore not 

 so speculative as may at first glance ap- 

 pear. Any security which can be given 

 as collateral for an amount so near the 

 face value is worth more than one which, 

 while equally sound, is less acceptable for 

 pledge against loans. 



In Cuba, especiallj^, where so large a 

 percentage of the population is engaged 

 in agricultural pursuits, the advantages of 

 a government bond which is practically 

 equivalent to a cash asset are peculiarly 

 great, and planters think their investment 

 in these bonds not expensive at a pre- 

 mium, even with the risk of losing a point 

 or two if their holdings are called in on 

 the occasion of the yearly drawings. 



The first drawing by lot of these bonds 

 was made recently by Speyer & Co. at 

 New York in the presence of Sr. Mariano 

 Rocafort, Cuban consul, acting at the re- 

 quest of the Republic of Cuba at the agent, 

 for redemption at par and accrued interest, 

 which interest ceases on September 1, 1911. 



Of the designated numbers $96,800 for 

 $1,000 each were taken from series '"A" 

 and $52,000 for $500 each from series "B''. 



An amount of $1,020,000 is to be re- 

 deemed each year. Inasmuch as the mar- 

 ket price of these bonds is well over par, 

 compulsory calling in and redemption is 

 necessary. 



Under the terms of the agreement as 

 it originally stood the amount of bonds 

 to be redeemed this year would be $1,415,- 

 GOO, as the sinking fund became operative 

 on March 1, 1910, and the payments made 

 op to July 1, 1911, would have been ap- 



\AuydlAc to redemi;ti:.ns at the present 

 time ; but an arrangement reached by the 

 government of Cuba and the bankers 

 alters the original agreement, in so far 

 at it concerns the first drawing, and it is 

 now provided that each drawing shall be 

 of twelve months' amount of sinking fund 

 payments, so that there shall not be at 

 the beginning or end of the loan any frac- 

 tions of years with which to deal. 



The sinking fund plan requires the pay- 

 ment of $85,000 from the revenues of the 

 republic to Speyer & Co. on the first of 

 each month, and the amount so received 

 each year must be employed for the re- 

 demption of bonds on the September in- 

 terest date. 



Cuban external 5 per cent bonds to the 

 amount of $35,000,000 were issued in 1904, 

 the public offering price being 97 and ac- 

 crued interest. They were oft'ered simul- 

 taneousty in New Y.ork, London, Frank- 

 fort and Paris, and were readily sold. 

 These bonds are secured by a special tax 

 on luxuries imported into the island, and 

 by a contract entered into between the gov- 

 ernment of Cuba and the bankers, pledging 

 15 per cent of the customs revenues of the 

 republic, and if that amount be insufficient 

 a greater amount must be set aside for 

 payment to the bankers. The bonds ma- 

 ture in 1944. Interest is payable semi- 

 annually at the New Y^ork and London 

 offices of Speyer & Co. ; by Lazard 

 Speyer-Ellissen, Frankfort-on-Main ; at the 

 Deutsche Bank, Berlin ; at the Credit 

 Lvonnais, Paris : and by H. Upmann & 

 Co., Havana. 



The total external funded debt of Cuba 

 consists of the following: 



External 5s $35,000,000 



External 4^2 s 16,500,000 



Total 



$51,-500,000 



The republic has also various internal 

 loans outstanding, issued since the estab- 

 lishment of independent government. 



During the last decade a number of 

 Spanish-American issues have been suc- 

 cessfully introduced in this country, and 

 the tendency of investors in the L^nited 

 States is inclining toward such securities. 

 ^Messrs. Lawrence Turnure & Co. have 

 within the last fifteen months purchased 

 a total of nearly $6,000,000 of the bonds 

 of the Cuban-American Sugar Company, 

 which they have placed in Europe through 

 well-known banking houses in London and 



