CONFIDENTIAL
but the Tunnel Company will not be
irrevocably committed to the French offer
until it has negotiated a contract with
Société Dumez, the French contracting firm.
However, it is clear that we have not got
very much time if we wish to do anything to
forestall this contract going to the French.
3. You will recall that ECGD's offer to
the Tunnel Company to guarantee a loan of £12.5m (being 75% of the contract price) at
51% interest and repayable over seven years
after completion of the tunnel was subject to
joint and several guarantees by the major
shareholders which included the Hong Kong
Government; the shareholders refused to
ive the joint guarantee. The French offer
would appear in some respects to be much less
favourable; the information at our disposal
suggests that it is for a loan of 75% of a
comparable contract price at 8% interest and
repayable over ten years after contract,
subject to the contract being placed with the
French firm. We are told, however, by the
Senior Trade Commissioner (EXCED No. 128) that
these terms do not include any guarantee requirement (although since that information
was given COFACE have sought and have been
provided with ECGD's views on the question of security for the loan)
it. We are, therefore, back where we were
in the middle of last year with the question
of guarantees once more highlighted as the
stumbling block to obtaining this contract
for a British concern. I think we ought
to examine again the arguments for and against
/ our reconsidering
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