TNAG-0423-FCO40-469-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 72

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EXPORT

CUARANTEE

CREDITS

ARTMENT

M

EXPORT CREDITS GUARANTEE DEPARTMENT

Aldermanbury House

Aldermanbury

London, EC2P 2EL

139)

Dear Ronald, NKK 21/

ак

HONG KONG MASS TRANSIT SYSTEM

3 July 1973

You telephoned me today about my letter of yesterday's date. You said there were three matters on which you would require further information as follows:-

a.

b.

an indication of the increase in preference which the latest proposals would involve;

**

a view on the question as to whether, in the event that the British group reached the final stages, further financing concessions would be required and if so which;

the four known bids set out in tabular form for the convenience of those considering the question.

2. I have discussed the question of preference with Lindsay Ryan and his people and mine are having some discussions about this today. I hope to let you have a further letter on this tomorrow.

3. As I told you on the telephone it is difficult to answer the question whether further concessions may be required at a later stage in the negotiations. It is never possible to say with certainty that one or other competitor may not try to clinch the matter with a further "sweetmer". What can be said, however, is that there has never been in discussions so far reference to any other financial facilities than those of which we are aware. The Hong Kong authorities have never given any indication that they are looking for longer credit terms than the 12 years now generally offered. Their principal concern is that they should not be involved in finding expensive funds to repay debt until the latest possible moment in time preferably at the point where the operation of the system is producing a positive cash flow out of which debt can be serviced. It is this concern which makes capitalisation of interest such an important issue for them. If one follows this thought further it could be suggested that at a crucial moment an offer of a further grace period beyond completion could have considerable attractions for the Hong Kong Government and I cannot with any certainty say that such an offer may not be made. My own view however for what it is worth is that details apart the terms and conditions that we are now being asked to concede represent essentially those which will be, offered by the winning consortium.

R Jones Esq

HM Treasury

Great George Street

London SW1

*

/4.