TNAG-0207-FCO40-243-Construction-of-a-cross-harbour-tunnel--under-Hong-Kong-harb-1969 — Page 61

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Lord Shepherd will wish to know that the Tunnel Company are sending representatives (not at present including Colonel Clague or Sir John Cowperthwaite) to London this week or next in the hope, to use the Company's own words, that "agreement in principle can be reached very quickly". They would then commence full-scale contractual negotiations with Costains (whose representative has recently returned from Hong Kong) aiming at awarding the contract by

20 May. They hope that the finance agreement will be ready by the

same date.

2. Sir A. Percival will lead the ECGD team, so that even if

Colonel Clague comes there should be no complaints that the Company

is not being adequately received.

3.

The Company says that its shareholders have all (including the Kadoories) agreed to give several guarantees proportionate to their

share of the equity but on terms and conditions which are still for

negotiation with the Department. The difficulty here will centre on the application of the guarantee to "political risks", a point on which the Hong Kong and Shanghai Bank in particular is known to have

some doubts.

4. On 29 March the Hong Kong Government issued a press release at the same time as their decision in principle to subscribe to the Company's

share capital on the basis of several guarantees became known. They did this (in agreement with us) because of the potential effect of

their decision on Stock Exchange dealings.

5. The original French offer, a Euro-dollar loan with commercial

shareholders only giving several guarantees, has been withdrawn and its place taken by a less competitive offer by the French bankers of

a franc loan which they would require all shareholders severally to guarantee. Thus the French terms are now very much in line with

ECGD's.

2 April, 1969

605.

Carter

(W. S. Carter)

Hong Kong Department

Copy to: Sir A. Galsworthy (on return)

Vohorts

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