On New Year’s Day in 1624, pieces of drifting ice down the river Lek in the Netherlands applied so much pressure on one of the dikes controlling the river’s floods that it led to a severe breach.
This resulted in a significant flood in the nearby town of Tull en ‘t Waal, close to Utrecht, and in much of the surrounding area. The adjacent canals’ levels rose, which was a serious issue for a country below sea level.
Private funding was required to carry out the necessary repair work. Today, 400 years later, someone in New York City is still collecting interest on that debt.
An Extreme Solution to Catastrophe
A painting depicting the reconstruction work on the Tull en ‘t Waal dike in 1624.
Historical documents indicate that the dike breach posed a significant problem for the Utrecht region, with potential floods threatening to reach Amsterdam. Fortunately, the flood was contained, but the reconstruction and improvement of the dike proved to be very costly.
The Netherlands was a financial powerhouse at the time. The local water authority, Hoogheemraadschap Lekdijk Bovendams, used modern financing systems to raise 23,000 Carolus guilders by selling more than 50 perpetual bonds.
Among those initial 50 perpetual bonds was one worth 1,200 Carolinian guilders. It was sold on Dec. 10, 1624, to a wealthy Amsterdam woman named Elsken Jorisdochter. In exchange for her loan, the water management company agreed to pay her descendants, or anyone else holding the bond, interest at a rate of 2.5% per annum in perpetuity.
400 years of history in Central Europe is a lot. Throughout that time, wars, floods, and fires destroyed many documents, including the 50 bonds. However, Jorisdochter’s bond, which is stamped on a piece of goatskin, has survived to this day.
The Hoogheemraadschap Lekdijk Bovendams water board no longer exists. It was taken over by the Hoogheemraadschap De Stichtse Rijnlanden. The modern water authority has classified the bond as one of its liabilities, committing to pay the agreed interest annually. In addition, it holds other perpetual bonds dated 1638 and 1648.
As Good as New After 400 Years
Most bonds have specific maturity dates and conditions, but this wasn’t always the case. Perpetual bonds are unusual financial instruments because they maintain a connection with the issuing entity or its subsidiaries for as long as they exist.
According to the Financial Times, the bond’s current owner, the New York Stock Exchange, received an interest payment on Dec. 10, a testament to its uniqueness. Despite shifts in continents and the political, economic, and technological transformations of the last four centuries, the Dutch water authority continues to honor its commitment to pay 2.5% annual interest on the bond’s face value. This amounts to around $14 each year.
A Dutch-American banker named Albert Andriesse, a senior partner at the banking firm Pierson & Co., donated the bond to the NYSE in 1938 as a reminder of New York’s Dutch origins. The city was originally known as New Amsterdam when it was founded in 1624, the same year the bond was issued.
Andriesse purchased the perpetual bond at an auction and donated it while visiting New York City. In 1941, he fled Europe as a refugee from World War II and settled in the city. According to the Financial Times, he passed away in 1965.
Image | Capital Amsterdam Foundation
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