Exhibition: The Louisiana Purchase

4: An agreement is reached

Alexander Baring proposed that the financing could only be achieved by the issue of bonds and, sitting between the two sides, counselled that France's initial demands for FF100 million were excessive. That sum could neither be afforded by the Americans, he said, nor provided by investors.

The price finally agreed was FF80 million (the equivalent of US$15 million). US$3.75 million (FF20 million) would be covered by the US government assuming responsibility for certain French government debts owing to US citizens, while the remaining consideration – US$11.25 million (FF60 million) – would be paid to France in the form of US government bonds.

Agreement, subject to ratification by both governments, was reached on April 30 1803. Having advised the Americans thus far, the bankers now sat alongside the French government and negotiated to purchase their Louisiana bonds for resale in the markets. That the bankers could operate in this way is testimony not just to their standing but also to the absence of effective competitors as, simply put, Hopes and Barings dominated the Amsterdam and London markets.

The bonds – which were some of the very first US securities issued in the international markets – carried six per cent interest payable in half yearly installments in Amsterdam, London or Paris and were redeemable between 1819 and 1822 (although by later convention earlier redemption was made possible). The exchange was fixed at 4 shillings 6 pence (22.5p) to the dollar.

By agreement of April 3rd 1803, the bankers undertook to purchase the bonds from the French government for FF52 million – a 13.3 per cent discount – in an initial installment of six million francs and then in 23 monthly installments each of two million francs. The first installment would be paid within 30 days of notice being received in Paris of one third of the bonds being handed to the bankers’ representative in Washington. These arrangements in place, Alexander Baring left for the USA to ‘complete the agreement in a regular manner’.

Alexander Baring wrote to his father, Sir Francis, from Washington in October 1803. He related the progress of his negotiations and the problems being caused by Spain.

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