TNAG-0955-FCO40-1174-Legislation-for-traffic-on-roads-in-Hong-Kong-1980 — Page 77

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RECEIVED IM REGISTRY NO.

0 2 OCT 1980

DESK, OFFICER

INDEX

REGISTRY

PA

Action Taken

COMMERCIAL IN CONFIDENCE

FM BTC HONG KONG 3602557 SEPTEMBER 80

K129

AKVS-D

TRED

TELEGRAM NUMBER EXCED 29 OF 30 SEPTEMBER

1. Mr for Scale

2. PA.

YOUR EXCED 02225, FARA 1.

TO IMMEDIATE E C G D

2

KOWLOON MOTOR BUS COMPANY

35

See

28

2

DEREK JONES, SECRETARY FOR THE ENVIRONMENT, HAS NOW RETURNED FROM LEAVE AND BROUGHT HIMSELF UP-TO-DATE ON OUR EXCHANGES ORIGINATING WITH YOUR EXCED 21912. HE HAS DESCRIBED THE FINANCIAL FORECASTS SENT TO YOU LAST WEEK

AS EXAGGERATED AND PRESENTING A WORST CASE SITUATION''. THE GOVERNMENT WILL BE STUDYING THE FORECASTS IN DETAIL WITH A VIEW TO REDUCING KMB'S PROJECTED COSTS, PERHAPS BY A RESCHEDULING

OF THE COMPANY'S PURCHASING PROGRAMME BEYOND 1981 BUT MORE LIKELY BY SOME VARIATION OF SCHEME (B) OF THEIR LAND/DEPOT PROPOSALS (PARA 3 OF OUR EXCED 24). WHATEVER THE OUTCOME THE ADMINISTRATION WILL PROPOSE TO EXECUTIVE COUNCIL WHATEVER FARE INCREASES ARE NECESSARY TO ENSURE THE VIABILITY OF

KMB'S BUS OPERATION, BUT ANY INCREASES ARE UNLIKELY TO BE OF THE MAGNITUDE ENVISAGED IN KMB'S FORECASTS,

2. A FURTHER POINT IS THAT KMB'S PALANCE SHEET DOES NOT

REFLECT THE STRENGTH OF THEIR ASSET BACKING AND THEY ARE

CONSIDERING A REVALUATION OF ASSETS TO CORRECT THIS

TOGETHER POSSIBLY WITH A FURTHER INJECTION OF SHAREHOLDERS

FUNDS (PARA 3 OF EXCED 24). BUT THIS WILL TIKE A LITTLE TIME TO WORK OUT.

3. JONES CONFIRMS THAT THE SCHEME OF CONTROL WILL CONTINUE

TO BE OPERATED IN SUCH A WAY THAT KMB WILL NOT DEFAULT ON THEIR LOANS. GIVEN THIS ASSURANCE HE HOPES THAT YOU CAN YOUR WAY TO ACCEPTING A LOAN AGREEMENT, WITHOUT A SPECIFIC GUARANTEE, FOR THE 406 BUSES WHICH KMB AND THE HONG KONG

TAM

SEE

26"