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target date for the opening of the airport in a "low case" scenario and it is considered prudent to assume that no more than a total of $150 (at March 1991 prices) could be charged to passengers by way of PTC and APDT at that time. The AA will be free to set a PTC higher than $100 after the opening of the new airport and the Government will approve such a level of charges unless to do so would result in the breach of an international obligation binding upon the Government (in accordance with provisions expected to be included in the Airport Authority Ordinance).
Dividend Payments
37.
As
is normal commercial practice, the draft agreement confirms that the payment of dividends to Government may be deferred to such an extent as the lenders of the project debt may require. Lenders are unlikely to agree to the payment of dividends if to do so would put at risk the ability of the AA to service its debt. On this basis dividends are likely to begin to be paid from 2005 after the project initial debt is expected to have been fully repaid.
Completion and Debt Service Undertakings
38.
Those who lend to a project with the repayment of their loans expected to be made from the project's cashflows normally require an assurance from the project sponsors either to put in all sums necessary to complete the project, or to pay off the outstanding loans and interest at an agreed date at which the project would be deemed to be in default. The lenders would normally find it unacceptable to accept the risk of non-completion of a project to which they were lending.
39.
An unqualified completion guarantee by Government would create an unacceptably large contingent liability on the future Government. Instead, the draft agreement provides comfort to lenders in the event of failure to complete by the targetted opening date, by crediting the AA with the surplus from the extended operation of Kai Tak. Unless traffic were to fall well below that expected or it proved impossible to introduce a PTC of up to $100 (at March 1991 prices), this surplus will be adequate to enable the AA to meet its debt service obligations. But the agreement recognizes that in the unlikely event that, after the application of the Kai resources available to it the Authority were still
Tak surplus and of all other
(including the callable equity), unable to service its debt, the Government would fund the Authority to the extent of the service ability until completion of
shortfall in its debt the airport.
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