XN000022-1987-05-06 — Page 34

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WEDNESDAY, MAY 6, 1987

+THESE CHARGES AMOUNTED TO HK$1 408 MILLION, COMPARED WITH HK$1 106 MILLION IN 1985, AND CAUSED THE CORPORATION TO SUFFER A LOSS AFTER INTEREST AND FINANCE CHARGES OF HK$936 MILLION IN COMPARISON WITH A LOSS OF HK$788 MILLION A YEAR EARLIER.

+THAT LOSS WAS OFFSET TO A MATERIAL EXTENT BY A PROFIT OF HK$482 MILLION REALISED DURING THE YEAR ON PROPERTY DEVELOPMENT, SO THAT THE FINAL LOSS FOR THE YEAR WAS HK$470 MILLION, CONSIDERABLE IMPROVEMENT ON THE LOSS OF HK$788 MILLION SUFFERED IN 1985, + MR YAXLEY ADDED.

HE SAID HE WAS CONFIDENT THAT THE CORPORATION WOULD CONTINUE TO DEMONSTRATE ITS INHERENT PROFITABILITY IN FUTURE YEARS.

+BUT, FOR SOME YEARS TO COME, ITS HEAVY BURDEN OF DEBT AND THE INTEREST CHARGES ON THAT DEBT WILL MEAN THAT LOSSES AFTER INTEREST WILL CONTINUE, ALTHOUGH THEY WILL BE REDUCED TO A USEFUL DEGREE BY PROFITS ON PROPERTY DEVELOPMENTS WHICH ARE EXPECTED TO BE REALISED AS DEVELOPMENTS ON THE ISLAND ARE COMPLETED. HE ADDED.

MR YAXLEY SAID THE CORPORATION'S CAPITAL STRUCTURE, AND THE SHARE CAPITAL AND DEBT COMPONENTS OF THAT STRUCTURE, WAS EXHAUSTIVELY ANALYSED BY THE CORPORATION AND BY GOVERNMENT WITH THE AID OF INDEPENDENT MERCHANT BANKING FIRMS TWO YEARS AGO.

+AS A CONSEQUENCE OF THAT ANALYSIS AND AFTER REVIEW BY THIS COUNCIL IT WAS DECIDED TO INCREASE THE CORPORATION'S AUTHORISED SHARE CAPITAL, TO ISSUE SHARES WITH A NOMINAL VALUE OF HK$5 000 MILLION TO THE FINANCIAL SECRETARY INCORPORATED IN PARTLY PAID FORM AND TO PAY UP HK$2 500 MILLION ON THOSE PARTLY PAID SHARES IN TWO TRANCHES.

THE FIRST TRANCHE OF HK$1 500 MILLION WAS PAID IN CASH TO THE CORPORATION ON DECEMBER 31, 1985 AND, IN TERMS OF THE COMMITMENT APPROVED BY THE FINANCE COMMITTEE, THE SECOND TRANCHE OF HK$1 000 MILLION WILL BE PAID TO THE CORPORATION IN CASH BY APRIL 1988, HE SAID.

+ON THE BASIS OF CURRENT FORECASTS AND ESTIMATES, THE BOARD OF THE CORPORATION AND I HOPE THAT IT WILL NOT PROVE NECESSARY TO REQUEST THIS COUNCIL'S FINANCE COMMITTEE TO APPROVE PAYMENT OF THE REMAINING SUM OF HK$2 500 MILLION.

+BUT I MUST CAUTION THAT ALL FORECASTS ARE FRAIL, HE STRESSED.

+THOSE TO WHICH I HAVE REFERRED ASSUME REASONABLE STABILITY IN THE WORLD'S CAPITAL MARKETS, AND HENCE IN INTEREST RATES, FOR THREE TO FIVE YEARS AND THEY ASSUME ALSO THAT THE MTRC WILL NOT BUILD EXTENSIONS TO ITS SYSTEM, APART FROM THE EASTERN HARBOUR CROSSING WHICH IS BEING FINANCED BY AN INNOVATIVE MEANS ANALOGOUS TO A LONG-TERM LEASE.

/+WITH THE