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Hong Kong Cross Harbour Tunnel
The Minister should, know that this proposition has been resurrected by CostainsMr. Michael Montague (B.N.£.C.) against the background of French willingness to provide finance for the project. He will recall that months of negotiation and political pressure led to refusal of 4.C.G.D. guarantees because the equity shareholders in the local company would not guarantee repayment of a loan of £12.5 m. which was much greater than the actual equity capital of the borrowing company itself.
This culminated in an agreed FRESH NOTICE setting out H.M.G.'s position. I attach a copy.
2. It is now alleged that Societe Generale (Paris) have offered the Cross Harbour Tunnel Company a loan of 75% of contract price repayable 10 years after contract at an interest rate of 8%. The contractor is Societe Dumez, known to be competent. The price is around that quoted by Costain.
These terms are apparently less favourable than those we offered, as to interest rates, size of loan, and length of credit.
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3. COFACE have asked our opinion about the proposition; particular, about security which was the crucial issue in our case. We have given them our views; I attach a copy of our telegram.
4.
We cannot guarantee that our security arguments will influence the French to take a similar line; still less that COFACE will not be instructed to take the risk by the French Government before they can give us their reaction. Mr. Whitaker is, however, going to Paris on other business next Monday, and I have asked him to discuss the security question in detail with our French Government opposite numbers whilst he is there. He will try to assess the odds about French intervention. we will report again when he returns.
5. In the meantime we advise the Minister that we see no grounds for changing £.C.G.D.'s underwriting conditions to meet this apparent threat of French intervention.
6. A draft interim reply to Mr. Michael Montague is attached on E..G.D. M/2/69 - herewith.
ir. antry
c.c. Mr. Hughes
Mr. Fell
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B.C.T.
Mr. Whitaker Mr. Rawlings hr. votterill
B.C.C.B.
(R. A. Dickinson) 8th January 1969.
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