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ACTION XMB-04
INFO OCT-01 EUR-12 ISO-00 ACDA-07 CIAE-00 DODE-00 PM-04
INR-07 L-03 NSAE-00 NASA-01 NSC-05 ERDA-05 OES-06
COME-00 OTPE-00 USIA-06 /061 W
--------------------- 029408
P R 121043Z OCT 76
FM AMEMBASSY LISBON
TO SECSTATE WASHDC PRIORITY 8812
INFO AMCONSUL PONTA DELGADA
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DEPARTMENT PASS EXIMBANK AND DEPARTMENT OF COMMERCE (MEPD)
E.O. 11652: N/A
TAGS: BEXP, PO
SUBJ: AZORES COMMUNICATION SATELLITE SYSTEM
REF: LISBON 5832
1. COMMATT DISCUSSED STATUS OF BIDDING ON ABOVE PROJECT WITH
ITT-SPACE COMMUNICATIONS V.P. WARD AND WITH FINANCIAL DIRECTOR
MURTIERA OF MARCONI.
2. ITT HAS INFORMED MARCONI BY SEPTEMBER 24 LETTER THAT IT
HAS INDICATIONS FROM EX-IM THAT EX-IM IS PREPARED TO SUPPORT
FINANCING OF SALE OF SATELLITE THROUGH COMMITMENT TO MANUFACTURES
HANOVER TRUST UNDER SUPPLIERS-CREDIT PROGRAM. TERMS OF
FINANCING WOULD BE AS FOLLOWS: 15 PERCENT DOWN, 85 PERCENT
PAYABLE OVER MINIMUM OF 5 YEARS, 9 PERCENT INTEREST RATE.
LETTER ADDS THAT ITT HOPES TO HAVE CREDIT PERIOD EXTENDED
TO 8 YEARS. WARD REPORTS THAT MARCONI CONSIDERS 5 YEAR
FINANCING NONCOMPETITIVE WITH OTHER BIDDERS. WARD TOLD
COMMATT THAT EX-IM INFORMED ITT THEY COULD NOT CONSIDER
A DIRECT CREDIT FOR THIS PROJECT BECAUSE OF ITS SMALL
SIZE ($3.5 MILLION) AND STATED THAT NEW POLICY WAS TO
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PROVIDE SUPPORT THROUGH EX-IM DISCOUNT PROGRAM.
3. MARCONI FINANCIAL DIRECTOR CONFIRMED THAT HE WAS
SEEKING LONGER PAYBACK PERIOD BECAUSE FIRM WILL HAVE
CASH FLOW PROBLEMS OVER NEXT FEW YEARS. CONSIDERABLE
CASH IS TIED UP IN OPERATIONS IN MOZAMBIQUE AND ANGOLA.
WHILE AFRICAN SUBSIDIARIES CONTINUE TO OPERATE, THEIR
FUTURE STATUS IS STILL UNCLEAR AND IT WILL BE DIFFICULT
TO REPATRIATE FUNDS FOR NEXT THREE TO FOUR YEARS. IN
ADDITION, MARCONI PROVISIONAL INVESTMENT PLAN CALLS
FOR SIGNIFICANT NEW INVESTMENTS IN NEAR FUTURE AS
MARCONI PORTUGUESA CHANGES ITS FOCUS FROM AFRICA TO
EUROPE. AMONG PROBABLE PROJECTS ARE COMMUNICATIONS
SATELLITE FOR MADEIRA AND SUBMARINE CABLES TO FRANCE,
THE UK AND NORTH AFRICA. THUS, FIRM NEEDS MOST FAVORABLE
POSSIBLE REPAYMENT TERMS. MURTIERA STATED FRANKLY TO
COMMATT THAT 5 YEARS, 9 PERCENT INTEREST TERMS WERE NOT
COMPETITIVE WITH JAPANESE, FRENCH OR ITALIAN BIDS.
HE IMPLIED THAT EIGHT YEARS IS MINIMUM MARCONI WOULD
CONSIDER.
4. FIVE BIDDERS WILL BE REDUCED TO TWO COMPANY SHORT
LIST ON/ABOUT OCTOBER 15. FINAL SELECTION WILL BE MADE
ON/ABOUT OCTOBER 20.
5. ACTION: EMBASSY DOES NOT HAVE DETAILS ON EX-IM
POLICY OF PROVIDING DIRECT LOANS ONLY TO PROJECTS OF
CERTAIN MINIMUM SIZE. WOULD APPRECIATE GUIDELINES
ON PROJECT SIZE, CRITERIA, ETC. WOULD ALSO APPRECIATE
EX-IM CURRENT THINKING ON RESPONSE TO ITT REQUEST FOR
FINANCIAL SUPPORT.
CARLUCCI
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