CONFIDENTIAL
FM HONG KONG
TO IMMEDIATE FCO
TELNO 1426
OF 031145Z SEPTEMBER 93
CONFIDENTIAL
нив
090/1
L8 SEP 1993
ра
Planey
Un blare
にん
9071
INFO IMMEDIATE PEKING, UKREP JLG HONG KONG, WASH
39,
021454
MDHIAN 3691
TOP COPY Q.DIST?
HK TELNO 1410: HONG KONG CREDIT RATING
1. WE HAVE GIVEN MORE THOUGHT TO THE DECISION OF STANDARD AND POOR TO DOWN-GRADE HK'S LONG-TERM IMPLIED RATING TO A-MINUS. WE HAVE ALSO CONSULTED ADVISORS IN NEW YORK AND TOKYO.
2. GIVEN THAT NOTHING HAS OCCURRED RECENTLY TO PRECIPITATE A DOWN- GRADING, WE ARE CONCERNED THAT OBSERVERS MAY CONCLUDE THAT EITHER WE OR THE CHINESE HAVE TOLD S AND P SOMETHING WHICH LEADS THEM TO CONCLUDE THAT RELATIONS ARE NOT GOING TO IMPROVE AND HK'S LONG-TERM CREDITWORTHINESS IS PERMANENTLY IMPAIRED. CLEARLY WE DO NOT WANT
THIS.
3. WE ALSO BELIEVE THAT, EVEN IF THE LINE OF ARGUMENT IN S AND P'S DRAFT PRESS RELEASE WERE ACCEPTED, IT DOES NOT LEAD TO THE LOGICAL CONCLUSION THAT IN THE LONG-TERM, HK'S ABILITY OR WILLINGNESS TO MEET DEBT OBLIGATIONS HAS BEEN ADVERSELY AFFECTED. INDEED, AS FAR AS THE AIRPORT IS CONCERNED, THE CHINESE HAVE BEEN URGING US PUBLICLY TO BE MORE FINANCIALLY PRUDENT AND TO RAISE LESS DEBT. WE BELIEVE THAT S AND P HAS PUT TOO MUCH WEIGHT ON A SPECULATIVE INTERPRETATION OF THE CURRENT STATE OF AIRPORT AND POLITICAL TALKS, AND GIVEN TOO LITTLE WEIGHT TO OUR EXCELLENT ECONOMIC SITUATION.
4. WE THEREFORE BELIEVE THAT WE HAVE GROUNDS TO APPEAL THE DECISION. WE HAVE GIVEN S AND P NOTICE OF OUR INTENTION TO DO SO. THE APPEAL WILL BE MADE BY THE FINANCIAL SECRETARY TO THE RATING COMMITTEE DIRECTLY BY CONFERENCE CALL. THE PROCESS IS EXPECTED TO TAKE PLACE NEXT WEEK. (FOR S AND P DECISIONS, ABOUT 80 PER CENT OF ENTITIES SUBJECT TO DOWN-GRADING (INCLUDING SOVEREIGN ENTITIES) APPEAL. MORE THAN HALF SUCCEED.)
5. S AND P WILL THEREFORE NOT ISSUE THEIR PRESS RELEASE. THE MTRC'S US BOND ISSUE WILL BE PUT ON HOLD UNTIL THE OUTCOME OF THE APPEAL IS KNOWN. WE SHALL KEEP YOU INFORMED OF PROGRESS.
PATTEN
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