TNAG-0207-FCO40-243-Construction-of-a-cross-harbour-tunnel--under-Hong-Kong-harb-1969 — Page 55

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CONFIDENTIAL

Hong Kong Cross-Harbour Tunnel

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 terms of contract being agreed between them, Costains will be the contractors. E.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 share- 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 concedes a temporary 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.

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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 omits all mention of either the waiver of guarantees or the trust fund. All parties 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.

I am copying this minute to Lord Shepherd's private office. You may wish to inform the Private Secretary at No. 10.

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HKKUH

MR. SANTRY

0.0.

Mr. Croft Mr. Wolls

Mr. Hughes

Mr. Dickinson Mr. Cotterill

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(A. E. PERCIVAL) 15th April, 1969.

B.C.G.D.