CONFIDENTIAL
XCC(92)57
would also draw on $1.5 billion at nominal prices ($1 billion in March 1991 terms) of pre-completion real estate revenues and $4.4 billion at nominal prices ($2.6 billion in March 1991 terms) of surplus provided by Kai Tak. Since the debt level had already been maximised in the "expeced case" it was assumed that no further debt would be raised to assist in funding the "low case".
The Agreement
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With the above financial analysis proceeding in parallel, teams from the PAA management and Government commenced discussions on a draft agreement which would outline the way in which Government's support for the financial plan would be provided. In formulating the agreement, several underlying shared principles and objectives were taken into account -
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a)
b)
c)
the agreement should form a reasonable basis upon which the AA might solicit loans from banks, credit agencies and other private financial institutions. It should, therefore, provide an adequate level of assurance to lenders that the shareholder (Government) will support the project as appropriate in any adverse circumstances;
the agreement should avoid creating open-ended or unquantifiable liabilities and contingencies for the Government and should minimize any which might extend beyond June 1997; and
while it was very likely that lenders would seek to have a completion undertaking or guarantee of AA debt from the Government, the agreement should provide for several less onerous support measures to be triggered to cover moderately adverse circumstances before any more general guarantees or undertakings were triggered.
It was also recognised that, whereas it was very likely that the Agreement would be compared with the airport railway financial agreement made between Government and the Mass Transit Railway Corporation (MTRC), the position of the PAA/AA and the nature of the airport project were fundamentally different in many respects from the MTRC and the
Executive Council