I
C
3. ALTHOUGH THEY REGARD IT AT THIS STAGE AS CONFIDENTAIL INFORMATION, KMB WANTED YOU TO KNOW - IN CASE YOU PLACED TOO MUCH EMPHASIS ON THE ACCOUNTS IN THEIR ANNUAL REPORT
THAT THEY HAVE ASKED WARDLEY TO ADVISE THEM ON CAPITAL
RESTRUCTURE OF THE COMPANY AND REVALUATION OF THEIR ASSETS.* LAWRENCE LOUEY SAID THAT THE HONG KONG DOLLARS 82 MILLION LAND ASSET IN THEIR ANNUAL REPORT WAS BASED ON HISTORICAL
VALUE AND WAS MORE LIKELY HONG KONG DOLLARS 1500 MILLION AT
CURRENT MARKET VALUE. THE NEED FOR CAPITAL RESTRUCTURE FOLLOWS
A GOVERNMENT CALL ON KMG TO DEVELOP NEW DEPOT (GARAGING AND SERVICING) FACILITIES. KMB HAVE APPARENTLY SUBMITTED TWO SCHEMES TO THE GOVERNMENT. SCHEME ''A'' WOULD'
REQUIRE EXPENDITURE OF OVER HONG KONG DOLLARS 1000 MILLION (600 THOUSAND ON LAND PURCHASE AND 500 THOUSAND ON MULTI-STOREY BUILDING). SCHEME **B** WHICH KMB PREFER BUT
WHICH GOVERNMENT WAS SAID NOT TO FAVOUR, CALLED FOR THE PROVISION OF LAND ON LEASE WITH NO REQUIREMENT TO BUILD, I E OPEN-AIR PARKING.
4. WHILE KMB CONSIDERED THAT HONG KONG GOVERNMENT SHOULD
PROVIDE A GUARANTEE FOR YOUR PURPOSES, (FOR THE TENUOUS REASON THAT THE EXPENSIVE IMPROVEMENTS TO KMB'S SERVICES WERE A
GOVERNMENT REQUIREMENT) MORRISON DISABUSED THEM OF THE VALIDITY OF THIS LINE (SEE PARAGRAPH 5) AND FURSUED WITH THE
LOUEYS THE REQUIREMENT FOR A BANK GUARANTEE. HE WAS
SHOWN A LETTER FROM THE HONGKONG AND SHANGHAI BANKING
CORPORATION OFFERING TO ISSUE A GUARANTEE AT A FLAT RATE
OF ONE HALF OF ONE PER CENT PER ANNUM. THE LOUEYS DID NOT
SEEM TO MIND THE CHARGE FOR THE GUARANTEE BUT WERE CONCERNED
ABOUT THE BANK'S REQUIREMENT FOR COLLATERAL. THEY CLAIMED
IGNORANCE OF WHAT THE BANK HAD IN MIND BUT MORRISON HAS SINCE
LEARNED FROM THE BANK THAT FOLLOWING THEIR REJECTION OF THE
BANK'S REQUEST FOR A DEBENTURE OVER ASSETS OF THE COMPANY
KMB WERE TRYING TO ARRANGE A COUNTER-INDEMNITY FROM THE
HONG KONG GOVERNMENT. NEEDLESS TO SAY IF THE COVERNMENT
WERE PREPARED TO INDEMNIFY THE BANK THERE WOULD BE LITTLE
PEASON FOR WITHOLDING A GUARANTEE DIRECT TO ECGD.
5. THE SECRETARY FOR THE ENVIRONMENT AND COMMISSIONER FOR
TRANSPORT ARE BOTH AWAY FROM HONG KONG AT PRESENT. MORRISON SAW JEAFFRESON, SECRETARY FOR ECONOMIC SERVICES, VERY BRIEFLY ON TUESDAY TO INFORM HIM OF YOUR NEW REQUIREMENTS, JEAFFRESON WAS DISAPPOINTED THAT YOU COULD NOT CONINUE TO ACCEPT THE SCHEME OF CONTROL AND LETTER OF COMFORT AS SUFFICIENT SECURITY AND FEARED AS A RESULT THAT KMB MIGHT