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These conditions are in no way unusual,
and
indeed anyone taking a risk on so large a sum would be acting imprudently, were they not to be required.
The first of these claims the right to call the
whole of the debt in the event that the guarantor de-
faults. This is a standard loan requirement of
institutional lenders; it is, for example, a World
Bank requirement.
The second condition is necessary to clarify our position in the event that the Hong Kong Government during the ten year period of the loan were to remove its assets from its present agents, the Crown Agents. It might well do this; it might e.g. transfer its assets to another agent. Or the developments which you describe in your letter might mean a severe reduc- tion in funds held in London. We should be guilty of negligence if we were to establish a form of guarantee which, at the instance of the Hong Kong Government, turned upon irrevocable instructions to an agent and left it open that the nature of the whole arrangement could be rendered null and void without the lender having the right to make alternative arrangements with the guarantor.
These two conditions seem to us to be standard prudent requirements of normal "underwriting". They cannot properly be construed as casting doubt upon the Hong Kong Government's good faith. It is. if I may say so, your involvement which tends to bring in the adjective "political" and this makes it difficult for us to operate in our usual "commercial" way (which we are by statute and training led to do).
The third condition is also entirely reasonable but we can dispense with it. I recognize that in their present "touchy" state the Hong Kong Government might object strongly to a commitment to keep a mini- mum sum in London and in all the circumstances we are prepared to drop this.
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