TNAG-1269-FCO40-1619-Banking-situation-in-Hong-Kong-1983 — Page 87

is free from of any encumbrance...

If BMFL should either

>

operate the 4th October Agreements or otherwise arrange

for the US properties to be charged by further documentation, CIL'S other creditors will clearly be

shocked to find that they had entered into a rescue

agreement upon the wrong premises. Undoubtedly, this

would result in at least some of the areditørs seeking

rescission of the rescue agreement. This would immediately

result in the liquidation of CIL. In this event, there

is bound to be litigation of a very aggressive kind by

liquidators of CIL and other creditors.

Therefore, even if CIL should cooperate in causing the

additional security documents proposed in the paper

relating to the US$6.70 million

million loan, there is no

guarantee that these additional security documents will be

free from attack. In any event, BMFL will be locked into

long war of attrition in the Courts in both Hong Kong

and the United States with uncertainties hanging over

their security for a long period, thereby, inviting its

Auditors to ask for yet more provisions for contingency,

both the

*

11.

Further, BMFL would be accused of standing. by

while a deception on the part of CIL took place. Not only

will its reputation suffer, this accusation will most

certainly be used to attack whatever securities BMFL may

have in any litigation. This would not necessarily

invalidate the additional securities which BMFL can obtain

from CIL, but will most certainly create a most

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