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#. Hery Dear
Heryday
OUT TO HONG KONG TELNO EXCED 29 OF 11/2 CYPHER/CAT A UNIT 2 JOHNSON
IMMEDIATE
LANT
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SECRET,
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ADDRESSED TO HONG KONG (FOR TRADE COMMISSION) TELEGRAM NUMBER EXCED 29 OF 11 FEBRUARY REPEATED FOR INFORMATION TO GOVERNOR HONG KONG
FOR HANNAM FROM DICKINSOM2
CROSS HARBOUR TUNNEL.
YOUR LETTER TO COTTERILL AND EXCED 22.
1. IN MAKING OUR NEW OFFER TO COSTAINS WE HAVE EXAMINED THIS CASE
DSPASSIONATELY WITHOUT REFERENCE TO PAST EXCHANGES EXCEPT TO
FRAME THE OFFER ON LINES WE HAVE BEEN LED TO BELIEVE IN THE PAST
WERE ACCEPTABLE TO THE PARTICIPANTS AT ONE TIME OR ANOTHER. IT 13
IN EVERY WAY A NORMAL E.C.G.D. FINANCIAL GUARANTEE OFFER OF A
TYPE HITHERTO ACCEPTABLE TO ALL WOULD BE BORROWERS IN THE LONDON
MARKET AND IS WITHOUT ANY SPECIAL POLITICAL OR OTHER UNDERTONES.
2.
(A)
THE UNDERWRITING PRINCIPLES ARE SIMPLE:
WE EXPECT EQUITY SHAREHOLDERS AND BENEFICIARIES TO BE
RESPONSIBLE FOR REPAYMENT OF FIXED INTEREST LOANS: IN THIS
CONNECTIONS WE ARE TAKING THE HONG KONG SHAREHOLDERS IN THE TUNNEL
AS HONG KONG (REPEAT) HONG KONG ENTITIES WITHOUT REFERENCE TO
THEIR BUSINESS INTERESTS OUTSIDE HONG KONG, THIS INCLUDES HONG
KONG AND SHANGHAI BANK.
NEITHER COUPERTHWAIT (PARA. 5 OF YOUR LETTER TO COTTERILL) NOR THE GOVERNOR SEEM SIEZED OF THIS YET. WE HAVE ATTEMPTED A
CLARIFICATION TO THE GOVERNOR VIA F.C.O. TODAY, IF IT IS STILL NOT
CEAR WHEN YOU RECEIVE THIS PERHAPS DEREK HILL OF HONG KONG EXPORT CREDITS COULD GIVE THE GOVERNOR DIRECT ADVICE ON THE QUESTION.
HE IS TRAINED IN OUR FINANCIAL GUARANTEE SYSTEM AND HELPED CREATE, IT. (B)
OUR REQUESTS FOR A FUND AND THE SEPARATE GUARANTEES FROM THE
SHAREHOLDERS IN PROPORTION TO THEIR EQUITY INTERESTS FOLLOW NORMALLY
ROM (A), AND WE ARE TREATING THE HONG KONG GOVERNMENT AS A COMMERCIAL SHAREHOLDER, AND NOT A GOVERNMENT, IN THIS RESPECT.
A FUND TO PROTECT FUTURE PAYMENTS IS NORMAL WHEN THE EQUITY
INTEREST IS SMALL IN RELATION TO FIXED INTEREST LENDING FOR
PROJECT OF THIS TYPE. IT HAS BEEN ACCEPTED AS NORMAL BY OTHER
COUNTRIES AND INTERNATIONAL CORPORATIONS, IT ALSO PREVENTS
ASSETS BEING SYPHONED AWAY WHILST A LOAN IS OUTSTANDING.
(C) AS FAR AS WE ARE AWARE THESE ARE THE ONLY ISSUES OF PRINCIPLE REQUIRING DETAILED CLARIFICATION AT THIS TIME, AND AS FAR AS
WE ARE CONCERNED THESE UNDERWRITING REQUIREMENTS WOULD BE REQUIRED
ON A COMMERCIAL BASIS FOR A SIMILAR PROPOSITION PROMOTED BY
PRIVATE ENTERPRISE ANYWHERE IN THE WORLD.
3. AS TO COMPETITIVE LENDING WE CAN ONLY SAY THIS:-
(A) IF CLAGUE RAISES U.S. MONEY AND SWISS MONEY, PRESUMABLY THE CONTRACT IS STILL OPEN TO INTERNATIONAL TENDER AND COSTAINS HAVE
AN EQUAL CHANCE FOR BUSINESS IF THEY ARE COMPETITIVE IN PRICE
AND QUALITY,
AS FAR AS WE CAN ASCERTAIN THE PROPOSEN U.S. LENDING IS PRIVATE:
EX-IM DENY KNOWLEDGE OF IT. WE ARE AWAITING A REPLY FROM THE SWISS, (B) WE ARE AWARE THAT THE FRENCH INTERESTS HAVE PROMISED OR
OFFERED MORE THAN THEY HAVE BEEN AUTHORISED TO OFFER BY
THEIR AUTHORITIES. TODAY WE HAVE AGAIN BEEN ASSURED BY THE LATTER
THAT THEY WILL MAKE NO DECISION UNTIL A COMMITTEE MEETS AT THE
BEGINNING OF MARCH. THE DIFFERENCE IN UNDERWRITING BETWEEN THE
FRENCH OFFICIALS AND OURSELVES IS NARROW. IT CONCERNS ONLY THE
WAY THE HONG KONG GOVERNMENT SHOULD BE TREATED. THE OFFICIALS
SUPPORT OUR VIEW THAT IT SHOULD BE TREATED AS AN ORDINARY
SHAREHOLDER; THEIR MINISTERS MIGHT NOT AND MIGHT WAIVE THE GUARANTEE.
WE CAN HARDLY GIVE THIS CONCESSION AWAY AT THIS TIME BECAUSE
COSTAINS ARE IN FACT THE ONLY COMPETITOR WITH A FIRM OFFER BEFORE
THE TUNNEL COMPANY - OFFERING TO LEND FOR THE COMPLETE JOB.
A. AS WE SEE IT WE HAVE NOW GIVEN THE HONG KONG PRIVATE
INTERESTS A BASIS FOR CLEAR AND SIMPLE DISCUSSION WITH THEIR
GOVERNMENT IF THEY WILL SHOULDER THEIR OWN COMMERCIAL
RESPONSIBILITIES.
THE QUESTION IS, ARE THEY WILLING TO DO THIS?
WE ASK IT BECAUSE WE HAVE THE IMPRESSION THAT IF OUR TODAY'S
REPLY TO SOME VERY PERTINENT QUESTIONS RAISED BY THE GOVERNOR, VIA
F.C.O. SATISFY HIM, HE MIGHT BE PREPARED TO PROPOSE THAT
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THE HONG KONG GOVERNMENT SHOULD GUARANTEE IN PROPORTION
TO EQUITY. GRATEFUL IF YOU WOULD CONSULT GOVERNOR'S OFFICE ABOUT
THIS.
5. IN ANY EVENT THE PRESENT POSITION AS WE UNDERSTAND IT IS THAT
OSTAINS ARE NOW THE ONLY PEOPLE MAKING A FIRM COMPLETE OFFER FOR
THE JOB, AND WE THINK, SUBJECT TO THE GOVERNOR'S VIEWS, THAT THIS OUGHT TO BE PRESSED HOME FORTHWITH WITH THE COMMERCIAL PARTIES.
PASS IMMEDIATE TO TRADE COMMISSION.
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