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HWB 12/5.
SAVING DISPATCH
CONFIDENTIAL
83
From the Secretary of State for Commonwealth Affairs
To the Officer Administering the Government of, HONG KONG.
Date
-3 NOV 1967
Saving
No
236
55-
My telegram No.1130 and your No.1344.
Cross Harbour Tunnel
You will be aware that during a recent visit to London of your Financial Secretary and other officials discussions were held on the terms whereunder E.C.G.D. are prepared to grant cover for the loan of £10 million from Lloyds Bank for the Tunnel project, and whereunder H.M.G. can subject to Parliamentary approval become associated in the required guarantee.
a result of these discussions the following terms have been formulated:-
(a) The Hong Kong Government should guarantee repayment of the
210 million loan plus interest by the Tunnel Company on the appointed dates, making good any failure or deficiency whether occasioned by political, technical or operational causes.
(b)
(c)
The Hong Kong Government should furnish this guarantee by issuing an irrevocable authority to their London Agents or Bankers to honour within 14 days of their due date, Promissory Notes issued by the Tunnel Company and bought by the lending Bank.
F.C.G.D. will require a lien on the Tunnel Company's net earnings (i.c. earnings after deduction of operating expenses).
(d) H.M.0. should reimburse the Hong Kong Government half the sum
involved in the calling of their guarantee, on condition that:-
(i) as much as possible of the Tunnel Company's funds are
committed before the £10 million loaned by Lloyds Bank is drawn an;
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(ii) rates and taxes are the first charge on the Tunnel Company's revenues, then repayment of the loan and interest for a like amount and then repayment equally with charges for land and royalties until one or the other is satisfied;
(iii) the Hong Kong Government gives an undertaking to ensure that finance is made available to complete the contract if costs increase; in no event will .C.3.D. guarantee any increase over £10 million in the amount of the Bank loan;
CONFIDENTIAL
/(iv)