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4. This intervention led Clague's mind into hankering after the simplicity of a cash loan from Switzerland or America as contrasted with the complicated guarantees which the British and French seem to require. He asked me to cable to you enquiring the size of the loan you would underwrite without asking for guarantees. Would it, for instance, be 50% of the total cost of the project? I suggested to Clague that this would not be profitable course to follow at the present juncture with E.C.G.D. as, I was not anxious to have to go back to E.C.G.D. with enquiries on tangental matters. Could he not now go to
the Hong Kong Government and the Hong Kong & Shanghai Bank and enquire about their attitude to the guarantees. I hinted to him that I had already received favourable signals from Cowperthwaite on the se matters.
I also told
him that I had sat next to baunders, Chairman of the Hong Kong & Shanghai Bank, the previous day and had hinted to him that the Tunnel Company might be approaching him with fresh news on this matter. I will keep up pressure on these lines, and will report to you when I hear anything further. I should perhaps emphasise that the Chinese New Year holiday on February 17, 18 and 19 will bring commercial life to an standstill in the Colony and that the days from then till the end of the month will be heavily occupied by preparations for the Budget. Clague, being a Member of the Executive Council, is bound to be involved in this.
5. Vine, the legal man on the Tunnel Board, questioned me about the difficulties of maintaining the guarantees after the company went public. I said that I was not qualified to discuss this, but I seemed to remember that this ground had been well covered in the discussions which the Tunnel Company had had in London. Neither Clague nor Vine nor I could remember details of this, so the discussion petered out. It was evident, however, that Vine is strongly in favour of resorting to partly paid shares. This will enable the Tunnel Company to call up fresh contributions from the equity sharehold ers in time of need, and it may be that you will hear of this proposal in due course.
6.
Clague then engaged in a rambling discussion of the way E.C.G.D. are asking for a double guarantee. On the one hand they mortgage the tunnel receipts and on the other hand they were extorting guarantees from the founder shareholders. I suggested that this too was a profitless speculation at the present time now that we all felt things
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