CS
√16/10 A 210/10
Mr
Treasury Chambers
Parliament Street London SW1P3AG
Telex 262405
CC Birch Esq
Inician
16.10
стру надо
Hery Kery BTC. M. B
Telephone Direct Line 01-233 8789
Switchboard 01-233 3000
HKRIZ?!!
Export Credits Guarantee Department
Aldermanbury House
Aldermanbury
LONDON
EC2P 2EL
INDEX
17 OCT 1980
M. JM.
Willaim for 17.10
Mr. Scarle
Tak
AW
161
Your reference
Our reference
AEF3 17/68/01
*Date
e4 October 1980
B.
NOTED
Anzolio
3weeks
MS17.10
We need to watch this as it
progresses
15/10
pa.
43
We shit
heep open the option (expressed in Dinh's litter Ir out) mar
furtis
COMP
SECTION 2 COVER: KOWLOON MOTOR BUS COMPANY LIMITED (KMB) HONG KONG
Guamenties
You wrote to me on 7 October seeking our agreement to cover being provided under Section 2 for an order for 356 buses, valued at £18 million, for the Kowloon Motor Bus Company Limited (KMB), Hong Kong. Cover has previously been provided under Section 1, the loan security resting on a comfort letter from the Hong Kong my Government. On commercial underwriting grounds you judge that such
if he
ย
H&G
a comfort letter is not sufficient if this new loan were to be added to existing loans already outstanding and ordinarily you would seek a third party guarantee. The Hong Kong and Shanghai Banking, Corporation (HKSBC) are willing to give such a guarantee but KMB themselves have argued against paying the guarantee fee or to accept the need for a charge to be given on their assets,or to relinguish control of their financial arrangements to the Bank. The Hong Kong Government have protested that their comfort letter gives sufficient security.
KMB Comments have been received from the Departments of Trade and
ere
sah's Jacky
Pl. keep
Industry, the Foreign and Commonwealth Office, and the Bank of England.
would be very
coy difficult now to withdraw anyway.
The strength of the industry case to provide cover is acknowledged. Normally this should not cloud the underwriting judgment but it seems ta me that the manufacturers themselves are so far along the road in supplying components in anticipation of the follow-on order that it
This very much weakens your negotiating position. Therefore, given the relatively uh short horizon of risk, I agree that you should support a loan under
Section 2 for 85% of £18 million, over 5 years, secured against the comfort letter.
RCAD
YEL
Whether we