Points to make
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Guarantees are covered in paragraph C(i) of the Airport MOU. The Chinese side will adopt a positive attitude to them. Guarantees naturally give rise
contingent liabilities: there can be no room for doubt that contentgent liabilities were foreseen in the MOU. Callable equity is an alternative form of guarantee, less onerous on the guarantor and therefore more cost-effective.
Paragraph D of the MOU deals with borrowing by the Hong Kong Government. No such borrowing has been proposed.
Notwithstanding the legal position, the Government is under a political obligation, in the interests of the people of Hong Kong, not to allow the PAA or the MTRC to become bankrupt.
Debt, guarantee and callable equity: p. 2 of 2
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