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COMPANY'S POSITION HAS CHANGED SINCE THEN. IN JUNE 1991, WE RECEIVED HYUNDAI'S FULL AUDITED 1990 ACCOUNTS. THESE WERE ANALYSED TO ASSESS THE CONSEQUENCES OF CERTAIN AUDITOR'S QUALIFICATIONS RELATING PRIMARILY TO HYUNDAI'S INABILITY TO RECOVER DEBTS IN IRAQ AND KUWAIT FOLLOWING THE GULF WAR.
14.
OUR ANALYSIS WAS COMPLETED IN AUGUST 1991, JUST AT THE TIME THAT TENDERS FOR THE TSING MA BRIDGE CONTRACT WERE BEING INVITED. WE CONSIDERED THAT TO DISQUALIFY HYUNDAI AT THAT POINT WOULD HAVE BEEN UNFAIR, AS THERE WAS AT THAT TIME NOTHING TO INDICATE THAT THEIR CAPITAL ADEQUACY POSITION COULD NOT BE RECTIFIED LATER. AS IS THE NORMAL PRACTICE IN SUCH SITUATIONS, WE WROTE TO HYUNDAI ASKING THEM TO RECTIFY THE SITUATION.
15. IN RESPONSE HYUNDAI GAVE CERTAIN ASSURANCES. THESE ASSURANCES WERE CONDITIONALLY ACCEPTED, BUT IT WAS MADE CLEAR TO THE COMPANY THAT ITS CONTINUED LISTING DEPENDED THEIR DELIVERING ON THEIR ASSURANCES AT THE TIME OF AWARD OF CONTRACT. IT BECAME APPARENT IN THE MONTHS FOLLOWING THAT HYUNDAI WOULD NOT BE ABLE TO MEET THESE ASSURANCES. IN DECEMBER 1991, HYUNDAI PROPOSED THAT THIS CAPITAL SHORTFALL BE OVERCOME BY MEANS OF GUARANTEES FROM CORE COMPANIES IN THE HYUNDAI BUSINESS GROUP ('CORE COMPANY
GUARANTEE').
16.
ON 26 MARCH THE CTB CONCLUDED THAT IT COULD ONLY FURTHER CONSIDER A TENDER FROM HYUNDAI IF THERE WAS A CORE COMPANY GUARANTEE IN RESPECT OF HYUNDAI ENGINEERING AND CONSTRUCTION'S PERFORMANCE UNDER THIS CONTRACT. IN ADDITION, SO AS TO PROTECT THE GOVERNMENT FROM HAVING TO RESORT TO LITIGATION TO ENFORCE GUARANTEES IN THE EVENT THAT HYUNDAI ENCOUNTERED CASH FLOW DIFFICULTIES WHICH AFFECTED THEIR PERFORMANCE, THE CTB RECOMMENDED OBTAINING A LETTER OF CREDIT TO COVER PART OF HYUNDAI'S SHORTFALL IN WORKING CAPITAL. HYUNDAI FAILED TO COMPLY
WITH THESE TWO REQUIREMENTS.
17. HYUNDAI THEN REQUESTED THE GOVERNMENT TO CONSIDER ACCEPTING THEIR ORIGINAL ACCOUNTS AS EVIDENCE OF SUFFICIENT CAPITAL TO COMPLETE THE PROJECT. TO DO SO, THE GOVERNMENT WOULD HAVE HAD TO ACCEPT DEBTS FROM THE MIDDLE EAST, SOME OF WHICH DATE BACK TO THE MID-1980'S, AS EVIDENCE OF SUFFICIENT WORKING CAPITAL. THIS WE
DID NOT/NOT FEEL ABLE TO DO.
18.
NOTWITHSTANDING HYUNDAI'S FINANCIAL DIFFICULTIES, THE GOVERNMENT FULLY EVALUATED THEIR TENDER ON THE BASIS OF COST AND
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