CONFIDENTIAL
Hong Kong Cross-llarbour Tunnel
C.C. Im Morris
M. Bain
Agreement in principle has been reached this morning on the terms of a loan to the Tunnel Company. Lloyds Bank will be the lenders, and, subject to tems of contract being agreed between them, Costains will be the contractors. B.C.G.D. will cover a loan for 75% of the contract value, up to a maximum of £14 million.
2.
The attached draft Press Notice has been pro- visionally agreed between the parties for issue tomorrow, Wednesday.
3. The agreement came at the end of a week's nego- tiations. The most difficult issue was to define the circumstances in which we would waive the requirement of several guarantees from the Tunnel Company chero- holders. We agreed to a waiver in the event of a take-over by the Chinese, but the Hong Kong interests insisted that this should be extended to include what they described as lose of effective de facto control by the Government of the Colony. The final formula concodes a tomporery waiver in that event, with pro- vision that the guarantees of the Tunnel Company shareholders become fully operative again after the Tunnel has been operated without loss for a period of six months.
4.
In the event of a Chinese take-over we would have access to a trust fund outside Hong Kong derived from part of the profits of operating the tunnel.
5. The Press Notice onits all mention of either the waiver of guerenteca or the trust fund. All partics wish to avoid public discussion of the possible con- sequences of action by the Chinese. Foreign and Commonwealth Office have also sought not to have attention drawn to this aspect of the Agreement.
6. I am copying this minute to Lord Shepherd's private office. You may wish to inform the Private Secretary at No. 10.
(A. E. PERCIVAL) 15th April, 1969.
MR. SANTRY
0.0. Mr. Croft
Mr. Wolls
Mr. Hughes Mr. Dickinson Kr. Cottorill
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E.C.G.D.
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