TNAG-1765-FCO40-2519-Hong-Kong-stock-market-and-exchange-rate-1989 — Page 58

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CONFIDENTIAL # #

Annex II

(a)

(b)

(c)

(d)

(e)

(f)

Main elements of the restructuring package

The existing facilities would be crystallised at the current level of drawings and any undrawn or repaid amounts would be cancelled, subject to (b) below;

A revolving credit line of $100 million would be made available from the Government facility to provide the necessary support for the Hang Seng Index futures market. This facility would remain available until 31 October 1989 (i e. until the expiry date of the original facility);

To enable the broker-lenders to contribute towards the long term capital of the new clearing house, and to assist both the broker-lenders and the shareholders to recapitalize their futures subsidiaries, where applicable, repayment of $200 million of their share of the loans would be advanced and given priority over the principal sums outstanding under the Government portion of the existing facilities;

The advanced repayments of the $200 million would be shared as follows the first $150 million to the broker-lenders and the remaining $50 million to the shareholder-lenders;

In return, the broker-lenders would make deposits with the Futures Exchange in 5 equal quarterly payments totalling $60 million as their capital contribution towards the new clearing house by 31 October 1989. This capital would be available on call to meet new contracts (mainly the interest rates futures contracts now under active consideration by the HKFE) to be traded on the HKFE from now till 31 October 1989. Thereafter, the capital would be available to meet the requirements of all contracts traded on the HKFE. (This is because the Government credit line would have expired by then);

The HKFE will seek an additional $40 million contribution towards the members' fund from the other clearing members (who are not lenders to the Lifeboat) in a similar manner to (e) above;

G.F. 326

CONFIDENTIAL # *