CONFIDENTIAL
2
5.
(b) an irrevocablo lion from the Cross-Harbour Tunnol
Company on tho total rovonuo of tho tunnol, in favour of the landing Bank;
(c) an irrevocablo undortaking by those two, shareholders,
together with the Hong Kong Govornment, the Hong Kong and Shanghai Bank and any other major shareholder, to subscribo additional capital to the Tunnel Company in approved proportions to raiso its prosont capital of £625,000 to £7 million.
In acknowledging Costains' offor the Tunnel Company roforred to those three conditions. They suggostod that if the loan could be increased_to 75% of the contract value "this would give your tender an added financial They stated further that a joint and advantago which could be decisivo". sovoral guarantos by the two participant companios could not bo provided. 6. Consequently the Company was informed that E.C.G.D. would guarantop a loan of 75% of the contract price (i.c. of nearly £10 million) and that, whilo waiving the requirement for a joint guarantco would still roquire sovoral guarantocs from the major shareholders of the full indebtedness of tho Tunnel Company in proportion to their own holdings in rospect of the overall ton years of construction and repayment during which E.C.G.D. would be at risk. 7. Wo suggested to the Hong Kong Government that, in view of thoir interest, they might tako tho load in an offort to obtain those guarantocs. It was pointod cut that if E.C.G.D. wore to undorwrite this loan without such guarantoos, they would be acting on the sole socurity of successful operation and would be totally unsecured during the throo years of construction. Moreover, B.C.G.D. guarantoo would thus bo porforming the function of risk capital without any control of the nanagonent of the project, and would be taking on speculativo risks at fixed interest rates well ' bolow the return such risks would justify.
8. The Hong Kong Governnont wore unwilling to agroo to givo a guarantoc and could not thoroforo sock to secure the proportionato to their sharo; consent of the other sharoholders who were also unwilling to put up a guarantoo.
9.
The two major commercial shareholders, while apparently agrocing with 3.C.G.D. in May to put up a 100% guarantoo, in Juno indicated through the Governor that they were no longer willing to̟ act as guarantors for the other cquity subscribors. In July tho Tunnel Company informed tho Hong Kong Government that the commercial shareholders proposed to limit thoir holding Mr.
Mount to
a total of $61 million (i.o. 55% compared with their original 77%) and