P.O BOX NO. 272, ALDERMANBURY HOUSE, ALDERMANBURY, LONDON EC2P 2EL
Telex 883601
Telephone: 01-606 6699 'Ext......
Miss J Kelley
HX Treasury
Farliament Street
Lonion SWIP ZAG
HKK 173
RECEIVED IN REGNTRY MO. 51
27 OCT 1979
Your reference
Our reference
DEK OFFICER
PA
REGISTRY Action Taken
Date
•EXPORT
51
CREDITS
KAN
RANTEE
DEPARTME
INDEX
No
HONG KONG MASS TRANSIT RAILWAY CORPORATION FINANCING
24 October 1978
С.с інков
it
1. The recent exchange of correspondence between Charles Birch and yourself on the subject of TRC dealt with a number of immediate issues. These issues renain with us and we shall be reverting to you from time to time as developments on each case unfold. This present letter is however concerned with a longer tem problen. It has been suggested to us that it might be possible to tap the Hong Kong dollar bond market to supplement the funds which are at present made available by the local braking systen on the basis of an agreed margin over best lending rates. The proposal has been put to us by Hill Samuel who are not the bankers for the present round of Phase 2 orders. They claim however to have spoken to TRC and to have gained the latter's interest in using the technique to finance a number of smaller orders which may be placed in 12 to 18 months time and which they argue would be additional to eaything which might come to the UK using conventional US or HK dollar financing.
2. Hill Samuel are aware of the present arrangements for raising Hong Kong dollar finance and we have made it clear that while it is possible to raise funds on the basis of an acceptable margin over best lending rates with no take out obligation on RCGD we would not wish to consider altemative proposals that will in any way be less attractive to us.
3. That having been said Hill Samuel has done a fair amount of research into the possibilities and we are content to explore their proposals not merely for the sake of future business with Hong Kong but also because we see a possible longer term benefit in utilising international bond markets for financing export business.
4. In our present discussions with Hill Samuel we have now reached the stage where Although some technical problems remain to be resolved in principle and a great deal more necas to be resolved in detail it seemed appropriate to have exploratory talks with the Hong Kong authorities on the subject. An opportunity will arise in the week commencing November 6 when Charles Birch and Richard Ranson will be in Hong Kong and the purpose of this letter is to describe the system es now envisaged and enquire mether you or the Bank has any fundamental objections to our conducting such exploratory talks in Hong Kong.
5.
I should make it clear at the outset that at present Hill Samuel considers that the market has a limited capacity for such issues and their present advice is that not more than 200m Hong Kong dollars would be involved. They have been looking solely at tonls which will qualify to be hell by the Hong Kong banking system as liquid assets-see paragraph 6 below. They envisage that a Loan Agreement would be drown up between Hill Samuel/ECGB on the one hand and TRC on the other. Under the Loan Agreement Fill Samuel would undertake to procure that specified Hong Kong banks would purchase bonds offered for sale by Mass Transit. The bonds will be issued over a relatively
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