CONFIDENTIAL
3
they hold proferential loan stock instead of equity shares. Thoro arcother ways in which the initial shareholders' position can be secured by comparison with later subscribors. (The lion on carnings nontionod in paragraph 5 will secure the same end after complotion);
(d) the Hong Kong Governmont modifies its position on prior
charges on the incono of the Tunnol Company. The Hong Kong Government is to receive paytonts under four main hoads:-
(i) charros for land;
(ii) royalties (for land and compensation to tho
forry companies);
(iii) ratos; and
(iv) profits tax.
Since the asset will be created by tho loan, H.M.G. would prefer a prior charge on carnings for ropayment of the loan. Thoy are prepared to accopt an oqual position. In recognition of the peculiar difficulties about ratos and taxos, H.M.G. arc propared to allow those to have first charge, the loan to rank socond for a like amount and thon equally with the Hong Kong Government on (i) and (ii) above until ono or the other is satisfiod.
(Note: If fresh priority categories are claimed by tho
Hong Kong Governmont, wo will considor thon);
(c) the Hong Kong Government undertake to ensure that financo is nado available to complete the contract if costs were to increase. This might be by increase in subscribed capital borrowing or otherwise. No increase beyond £10 million will bo agrood in any circumstances in the loan guarantood by E.C.G.D. But H.M.G. must be assured that the project will be completod. E.C.G.D. normally sock sono such assuranco unless tho borrower's assets are clearly sufficient for contingencies. The World Bank similarly sock such
assuranco;
(f) the Export Crodits Guarantec Department are satisfied as
to the contractual details (soc paragraphs 7 and 8 below);
(g) in the event of the guarantco being called, the Hong Kong
Government will exorcise its best ondoavours to recover paymont from the Tunnel Company and any suns recovered shall bo sharod equally botwcon the Government of Hong Kong and
H.M.G.
CONFIDENTIAL
/7. E.C.G.D.