CONFIDENTIAL
FM HONG KONG
TO IMMEDIATE FCO
TELNO 2748
OF 040455Z SEPTEMBER 91
CONFIDENTIAL
this 102/3
TOP COPY Q DIST?
062776
MDHIAN 1194
YOUR UNCLASSIFIED TELNO 4582: BANK OF CREDIT AND COMMERCE HONG KONG LTD. (BCCHK).
1. WE CONFIRM THAT THE POSITION REGARDING A COMMITTEE OF ENQUIRY REMAINS AS INDICATED IN OUR TELNO 2510. ON MONDAY 2 SEPTEMBER THE PROVISIONAL LIQUIDATOR SIGNED CONDITIONAL HEADS OF AGREEMENT WITH THE HONKONG CHINESE BANK (HCB) GIVING THAT BANK EXCLUSIVE RIGHTS TO NEGOTIATE WITH HIM FOR A PERIOD OF UP TO EIGHT WEEKS FOR THE
ACQUISITION OF BCCHK. (TWO OTHER POTENTIAL PURCHASERS HAD RULED THEMSELVES OUT BY THE CONDITIONS THEY SOUGHT TO IMPOSE.) WE ARE FAXING YOU COPIES OF THE PRESS RELEASES ISSUED BY HCB AND THE PROVISIONAL LIQUIDATOR AND OF SUPPLEMENTARY MEDIA QUESTIONS AND
ANSWERS PREPARED BY HCB.
2. IT WILL BE SEEN THAT THE CONDITIONS INCLUDE THE COMPLETION OF A SATISFACTORY DUE DILIGENCE REVIEW OF BCCHK'S BUSINESS BY HCB AND WE REGARD THIS AS THE MOST IMPORTANT HURDLE. WE BELIEVE THAT HCB WILL ONLY PROCEED WITH THE PURCHASE IF THEY CONSIDER THAT BCCHK EITHER HAS POSITIVE NET WORTH OR THAT ITS NEGATIVE NET WORTH IS VERY SMALL. MUCH WILL THEREFORE DEPEND ON THE VIEW TAKEN BY HCB'S ACCOUNTANTS - VALUED PURELY AS A GOING CONCERN BCCHK WOULD PROBABLY BE REGARDED AS HAVING SOME POSITIVE NET WORTH BUT VALUED ON THE BASIS OF A LIQUIDATION THE NET WORTH MUST ALMOST CERTAINLY BE REGARDED AS NEGATIVE.
3
ANOTHER CONDITION IS THAT THE ABU DHABI AUTHORITIES PROVIDE A SATISFACTORY INDEMNITY AGAINST ANY UNRECORDED LIABILITIES. GIVEN THAT THE INTENTION IS TO TRANSFER THE ASSETS AND RECORDED LIABILITIES OF BCCHK INTO A NEW ENTITY AND THAT ONCE THIS HAS HAPPENED THE INDEMNITY CAN FALL AWAY, WE ARE HOPEFUL THAT ABU DHABI CAN BE PERSUADED TO PROVIDE AN INDEMNITY WHICH MEETS HCB'S AND THE PROVISIONAL LIQUIDATOR'S REQUIREMENTS. THEY HAVE ALREADY PROMISED TO DO SO ORALLY THE COMMISSIONER OF BANKING HAS BEEN CLOSELY INVOLVED BUT WILL NEED TO BE SATISFIED THAT THE PROPOSED STRUCTURE OF THE NEW BANK WILL MEET HIS REQUIREMENTS.
M
4. THERE WILL NEED TO BE A PRIVATE MEMBER'S BILL TO ENABLE THE
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CONFIDENTIAL