From
phone No. & Exi
Department
Priority
Confidential
HWB 20/5-
Draft 20. telegram to Hong Kong Government
Hong Kong Tunnel
As you will know, Cross-Harbour Tunnel
Company are considering tenders submitted for
tunnel linking Hong Kong and Kowloon. Clague
Chairma of Tunnel Company and of Hutchisons-
International, has been pressing Costains for
improvement in proportion of contract price to
cand fear be covered by loan guaranteed by E.C.G.D. Secretary the removal of the requirement for joint + several guarantee. of State and Snelling were also pressed on this
point when in Hong Kong recently.
Slys 32.
You will wore that
longer Vermemand for and seven and
guarantees)
skick
You should know in/confidence that it has
in/co
now been agreed that E.C.G.D. may guarantee a
loan in respect of 75% of price.
within the meat" were i
>
In informing
Clague of this decision Lord Brown will be making
it clear that this offer is conditional on major
shareholders giving their several guarantees
of repayment of loan in proportion to their share-
holding. If E.C.G.D. were to guarantee the loan
of some £10 million to the Tunnel Company without
these guarantees, they would be acting on the
sole security of successful operation and would be
totally unsecured during the three years of
construction.
(E.C.G.D). La
Moreover
team Guarantice,
would thus be
performing the function of risk capital without
any control of the management of the project, and
would be taking on speculative risks at fixed
interest rates well below the return such risks
would justify.
ci B.
By contrast the two major shareholders
would be risking equity capital of less than
£6 million between them.
54.
We appreciate reluctance of Heng Keng
Government to become over-involved in investment
by private financial interests. It would,
/however,