:
5 Compared with the terms on which finance was originally to have been made available for the Power Station contract the terms proposed here seen attractive. The spreads proposed (particularly by Chartered Bank) are much more reasonable bese the loan is only 4th of the size of that sought for CLP. Taken with the current level of Best Lending Rate which is still at 44% total cost of funds would be 6% which leaves a considerable margin in our favour compared with the fixed rate of 72% payable by the borrower. Although Best Lending Rate is expected to rise in the foreseeable future opinion predicts a no more than 2% increase which would still leave nearly a full 1% between cost of funds and the fixed rate.
6
Against this background we feel that there are grounds for reconsidering our original position and supporting an offer by HetCam using finance from the Chartered Bank on the terms proposed. The MTRC attach considerable importance to the financing of this contract in Hong Kong dollars and as such our agreement to support an offer of this kind will materially assist them in obtaining the contract.
7 Although the total offshore requirement for Phase II may amount to £150m including an additional railcar order for MetCam for a further 150 cars, there would be no obligation or commitment on our part to provide any further finance in local currency. MetCam have stressed that if the option is taken up their chances of winning the order for a further 150 railcars to be placed later this year will be greatly enhanced. Norman Thompson, chairman of MTRC, is due to see Ken Cotterill and Bob Kemp on Monday 20 February at which meeting we are hoping to establish MTRC's Phase II financing requirement. A submission to EGC will follow that meeting.
8 We have not overlooked the recent correspondence with the Bank of England on the subject of local currency financing but the terms offered and the importance of the contract to MetCam fully justify our supporting Hong Kong dollars to ensure that the business is clinched quickly. As the option contract is to be considered by the MTRC Board on Monday 13 February your agreement is required urgently, in any event no later than noon on Thursday 9th, to our guaranteeing under Section 2 a Hong Kong dollar loan for not more than HK$220m on the terms set out in paragraphs 3 and 4 above.
Your imenoty
CC Birch
CC
D Shilson
BOE
RM Prideaux
ODM
M Hodgkiss
DOT
J Ayres
FCO
PGF Bryant
DOT (OPG)
J W Davey
MOD
M Oldham
Miss M Z Terry
F C Munns
D H Twyford
D C Cooper
JC W Friend
D M March
DOI
CRE4 DOT
DOI (V)
ECGD
Hong Kong
2
No comments yet.
Private notes are available after approval.