The change respecting the bonds is set forth toy Mr. Shepley in his report. He says :
The guarantee of interim bonds during the period of construction to be compulsorily convertible into the guaranteed permanent bonds on the completion of the work of construction, which was the scheme for interim aid contemplated by the agreement of 1903. During the negotiations it was found impracticable to devise a workable scheme on the precise lines of the agreement, and there were found to be formidable market objections to bonds issued on the terms contemplated. The method adopted in the mortgage submitted is to provide for the immediate issue of permanent bonds, adding to the fifty-year period of currency of such permanent bonds, which period was under the agreement to begin on the completion of the division, the seven years limited by the agreement of 1904 for such completion, making the bonds at once fifty-seven year bonds.
The objection from a finance point of view was that making two issues of bonds, one at seven years and then another of fifty years, that is making two separate transactions, involved two separate market charges, which would amount, to a very large sum on a huge transaction of this character. There was no objection from the government point of view to making the one issue of bonds for fifty-seven years rather than making one issue for seven years and another for fifty years. The net result, so far as the government is concerned, is the same, and there is a large saving of expense by having one issue instead of two.
Mr. FOSTER, What was the object of the interim bonds at first ?
To assist the company during construction. In a first draft of the agreement it was provided that the company should receive aid on the completion of the line. As the matter progressed it became clear that the road could not be built on those terms, so we had to provide for the issue of interim bonds which at the close of construction, would be compulsorily convertible into more permanent bonds. And in that conversion there were these market charges which, on a large transaction, would amount t'o a great deal of money.
If my hon. friend will look at the original agreement he will find that authority is given to issue bonds with respect to the prairie section to the extent of $20,000 per mile, and on that $20,000 per mile the government guarantee $13,000 per mile. But it has been ascertained that so far as this section is concerned the financing of the enterprise would entail an issue of bonds to the extent of $21,500, and under schedule * B ' they are authorized to issue to that extent. But our obligation remains unchanged.
The only change, though it is not strictly a change, is with respect to the character of the undertaking instead of having the western extension as security for the bonds we take in addition the leasehold interest in the eastern section so as to cover at once the whole transaction.
Section 2 confirms the mortgage in schedule b. It has reference to the transaction between the Grand Trunk Pacific Railway Company and the Grand Trunk Railway Company in regard to the second mortgage bonds. It is a condition of their agreement with the government that they shall get the second mortgage bonds guaranteed by the old Grand Trunk Railway Company, and schedule b provides for that mortgage.
The paragraph to which that refers is to be found at the end or page 10 of the Bill which we are now considering. It is the schedule, article 1, section 5. My hon. friend will see that the expression ' construction work ' is practically intended to cover the work during the process of construction and is intended to enable advances to be made on materials which have been delivered in the country, which would not be covered by the original section 15 of the first agreement.
It was thought that probably the words in the existing Act would permit that, but to prevent any doubt it was made clear that on goods delivered in Canada, although not actually delivered on the railway, advances may be made. For example, if a ship load of rails were landed in Montreal-that is not a very good illustration, because we expect to make the rans i:i Canada-these rails will have to be paid for. and the moment they art delivered the lien of the government applies to the property ancl wg can make advances on tnem, so long as they are to be used in the construction of the work.