22 OCTOBER 1937, Page 55


Investors who took my 'advice in June to buy the income debentures of the A.W. Second Stock Trust will be pleased to see matters working out according to plan. It will be recalled that the trust's assets, apart from some £55o,000 in gilt-edged securities, consist largely of I,000,000 £I First Preference and 350,000 CI Second Preference shares in 'the Armstrong Whitworth Securities Company. This undertaking is proceeding steadily towards -a voluntary liquidation in which there will be sufficient cash available from the sale of assets to cover the whole of the preference capital, which is repayable at par. The A.W. Second Stock Trust is therefore awaiting the receipt from the Securities Company of a sum of £1,350,000.

Redemption of the trust's income debentures, which, it has been held, are 'entitled to arrears of interest as well as capital, could almost be effected by the sale of the gilt-edged securities, but not quite. The board is therefore proposing to fix the redemption price at £120 per £roo of stock, or just a little less than capital plus net arrears of interest, and to pay out the debenture holders at an early date by borrowing a modest sum in advance of the receipt of the'money from the Securities Company. My own view is that the plan is a reasonable one, since it speeds up the debenture repayment. Since I recom- mended A.W. Second Stock Trust debentures the price ,has moved up from roughly £m to £116. If allowance is made for brokers' commission and stamp duty there is now little margin left for a purchase in anticipation of early repayment at £120, but holders should obviously await redemption.

My view of the debentures of the A.W. Consolidated Trust, whose only asset is 750,000 £r Second Preferences in the Armstrong Whitworth Securities Company, is unchanged. These debentures stand at £64 and are still worth buying for repayment at a price just under £75 when the Securities Company's liquidation has been completed. If the waiting period is twelve months a buyer would have a tax-free profit of roughly £io on an outlay of £64, or the equivalent of 16 per cent. tax free per annum.