TNAG-0770-FCO40-974-Construction-of-underground-railway-system-in-Hong-Kong-1978 — Page 56

XPOR

ARANTEE

DEPARTME

Miss J Kelley

Treasury Parliament Street

London SW1P 3AG

HKK 175

INDOX

18/1

148

EXPORT CREDITS GUARANTEE DEPARTMENT

MISTRY MO. 51

5 S 1978

er

OFFICER

PA

REGISTRY

01-606 6699

No of

Aldermanbury House.

Aldermanbury

London, EC2P 2EL

Telex: 883601

21

1

22 September 1978

Pear Joan

HONG KONG MASS TRANSIT RAILWAY CORPORATION

In my letter of 24 February I set out the possible opportunities for UK industry in relation to Phase 2 of HMRC's programme and reported on the requirement by Norman Thompson of a general assurance that we would support broadly the same terms for Fhase 2 as for the KetCam Option contract then in negotiation.

2 This assurance was given with our agreement in a letter written by Lazards which reported that ECGD would be willing to support finance in either Hong Kong dollars or US dollars at MTRC's option for Fhase 2 business of up to £100m on the basis of 85% financing over 8 years from mean delivery at a fixed interest rate of 72 provided that, in so far as the Hong Kong dollar option was concerned that currency continued to be available on terms comparable to those which obtained for the Cption contract. At that time funding was arranged for the full period at a margin of 14 over Best Lending Rate until the end of the drawdown period and at 18% thereafter. The Hong Kong banks' Fest Lending Rate

was then 4: it is now believed to be 6%.

The

3 Subsequently in writing to you in the context of Kesco Units 3 & 4 and in relation to the CLP transmission line my letter of 5 Kay refers - I spelt out our potential commitments on, and attitude towards, Hong Kong as a market. assessment made at that time remains broadly valid and the purpose of this letter is to formally request your agreement to:-

& our proceeding with Fhase 2 commitments in excess of the £60m delegated authority for A markets. We propose to take this under Section 1 at least for so long as we are able to maintain the requirement for a Hong Kong

་

- Government Guarantee (on which incidentally all other OCIs are insisting);

b

to continue to offer support in Hong Kong dollars (which HTRC continue to prefer) on the basis of no take-out and a margin over Best Lending Rates broadly comparable with those agreed for the Option, contract;

C at least in the case of the major construction contracts, to both support up to 15% of the UK element for local costs and the capitalisation of pre-commissioning interest.

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