A
Miss J Kelley
Treasury
obligation might be several years ahead but whatever the prevailing interest rate for bonis qualifying as liquid assets we again envisage that any which may be issued by
TRC under these arrangements should carry a fixed rate of 7.75%. If prevailing interest rates were then high this second bond issue would have to be Lade at a discount and we would then expect to face an immediate call to make good the deficiency between face value and issue price. Conversely if interest rates were low we would expect the bond to be issued at a premium and resulting savings will accrue to us. Of course if interest rates were exceptionally high we might regard it as advantageous to exercise our right to support a floating rate loan at an agreed margin over prize in the hope that interest rates would decline during the balance of the loan repayments period.
11. In order to qualify as liquid assets the bonds must be negotiable. Although once the bonds were issued and MTRC had received the purchase price there would ce no further funding obligation on subsequent bond holders we nevertheless envisage that it may be necessary to limit the parties to whom the bonds could be negotiated. In respect of whether the banks originally subscribing for bonds sold all or part of their holling they would remain committed to put up roll over finance either in the form of a second bond issue or as a floating rate loan.
12. Many other points remain to be resolved and it could be that the Hong Kong authorities would not regard an issue of five year bonds coupled with a non negotiable commitments to rollover part of the purchase price as constituting sufficiently liquid assets. This is one of a number of points which might usefully be discussed in Hong Kong.
13. Before we embark on such discussions we would welcome confirmation that you have no objection in principle to the scheme as outlined above.
GE Breach
Co
D Shilson
M Hodgkiss
M Oldham
Miss M Z Terry
G Boyes
P Twyman J Ayres
BOE
DOT
DOI
CRE 4 DOT
DO Transport
DOT (OFG)
FCO
3
H
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