TNAG-0206-FCO40-242-Construction-of-a-cross-harbour-tunnel--under-Hong-Kong-harb-1969 — Page 138

CONFIDENTIAL

but the Tunnel Company will not be

irrevocably committed to the French offer

until it has negotiated a contract with

Société Dumez, the French contracting firm.

However, it is clear that we have not got

very much time if we wish to do anything to

forestall this contract going to the French.

3. You will recall that ECGD's offer to

the Tunnel Company to guarantee a loan of £12.5m (being 75% of the contract price) at

51% interest and repayable over seven years

after completion of the tunnel was subject to

joint and several guarantees by the major

shareholders which included the Hong Kong

Government; the shareholders refused to

ive the joint guarantee. The French offer

would appear in some respects to be much less

favourable; the information at our disposal

suggests that it is for a loan of 75% of a

comparable contract price at 8% interest and

repayable over ten years after contract,

subject to the contract being placed with the

French firm. We are told, however, by the

Senior Trade Commissioner (EXCED No. 128) that

these terms do not include any guarantee requirement (although since that information

was given COFACE have sought and have been

provided with ECGD's views on the question of security for the loan)

it. We are, therefore, back where we were

in the middle of last year with the question

of guarantees once more highlighted as the

stumbling block to obtaining this contract

for a British concern. I think we ought

to examine again the arguments for and against

/ our reconsidering

...

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