Contingent Interest

From Dusseldorf, Germany, last week came despatches that the Vereinigte Stahlwerke (United Steel Works), second in size only to the United States Steel Corp., had signed contracts for a $34,000,000 loan--$30,000,000 to be sold in the U. S. through Dillon, Read & Co., and $4,000,000 in England, Switzerland, Holland, Sweden. An unusual feature of the proposed bonds is that they will draw interest and in addition will get 6 1/2% more for every 1% increase in Vereinigte Stahlwerke's common stock dividend rate. The common rate is now 6%. If it becomes 1%, the new bonds will draw 1%; if common draws 8%, new bonds draw 71/6%.

This inducement of. an extra dividend on bonds, which normally are sold to carry a fixed rate of interest, was experimented with last September by Siemens-Halske, German electrical organization, in selling its bonds in Manhattan. In their case the contingent bond interest was 1/3 of 1% when common stock rose above 1%.