OBRY FOR RECISTRATION
CONFIDENTIAL
INWARD TELEGRAM
TO THE COMMONWEALTH OFFICE (The Secretary of State)
FROM HONG KONG (O.A.G.)
1967
Cypher
D. 6 July 1967
0930Z
Ro
6
36
IMMEDIATE
CONFIDENTIAL
No.974
+
(35) Your telegram No.1346.
Harbour Tunnel.
The Company have informed me that the five promoters are now proposing to limit their own shareholding to a total of 861 million. On the basis of the credit terms offered, this leaves $49 million to be subscribed by other shareholders. They have asked this Government to take up its full 25% option amount- ing to $27.5 million and to induce theYAumati Ferry Company to take up the remainder. They also ask that Government should agree to accept reimbursement of the $12 million of public funds to be spent on road connections being received in instalments over 21 years rather than prior to completion. They furthermore say that they are not now prepared to guarantee any part of the loan funds and ask that I use my influence to persuade H.M.G. to waive any guarantee.
RE
20
I understand that Costains are holding their present
tender offer open only to 10 July.
ろ。 This new situation puts me in a difficult quandary. As you are aware, our attitude has always been that in the light of our other pressing commitments we regard the project as
deserving low priority in the use of public funds and it was with
some reluctance that we proposed to contribute $15 million to the share capital, a proposal not yet agreed by Legislative Council. On the other hand, it would be a serious blow to confidence, both political and commercial, if it became necessary at this juncture to announce that the project had fallen through for want of financial support. I am therefore considering very seriously offering to take up with public funds the full remaining 849 million and at the same time to convert the $12 million spent on tunnel approaches into Equity. It is understood that the Company would accept this latter proposal, which would reduce the loan requirement to that extent. I would propose to offer part of the 49 million to Yaumati but only in such an amount as would leave Government and the Hong Kong and Shanghai Bank with a controlling interest.
40 The Company has also suggested that we declare now that we will implement the provision in the draft franchise reducing royalty to be collected during the first even years of operation
from 121% to 71%. I would be prepared to RECEIVED IN
LAST
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