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Tuesday, 4 May 1971

Senator COTTON (New South Wales) (Minister for Civil Aviation) - I move:

That the Bill be now read a second time.

This Bill seeks the approval of Parliament to borrowings by the Commonwealth of $US29.58m ($A26.4m) from the ExportImport Bank of the United States and the Boeing Company, and $US30m ($A26.8m) from a syndicate of United States commercial banks led by the Chase Manhattan Bank of New York to assist in financing the purchase of jet aircraft and related equipment by Qantas Airways Ltd. The loan agreement with the Export-Import Bank and Boeing appears as the First Schedule to the Bill and the Second Schedule contains the agreement with the commercial banks. The Export-Import Bank Agreement has been signed by all the parties but some of the banks have yet formally to sign the other agreement. However, it is expected that this process will be completed shortly.

The proceeds of the loans will complete the finance for the purchase by Qantas of its first 4 Boeing 747 aircraft and related equipment, spares and services estimated to cost in all $US140m ($A125m). Because of the cost of these aircraft and the fact that a large proportion of the contract price was not due to be paid until this year, the borrowings of approximately $US113m ($A101m) required by Qantas for the purchase were arranged in two tranches. As honourable senators will recall, in 1968 a borrowing of $US53m from the ExportImport Bank, Boeing and a syndicate of United. States commercial banks, led on that occasion by Morgan Guaranty Trust Company of New York, was arranged to finance pre-delivery payments on the aircraft and was approved by Parliament. The present loans will complete the finance required by Qantas. The general arrangements for the borrowings are similar to those approved by Parliament for other loans for Qantas and Trans-Australia Airlines in recent years. The Commonwealth will be the borrower in the first instance, and the full proceeds of the loans will be made available to Qantas on terms and conditions to be determined by the Treasurer pursuant to clause 6 of the Bill. These terms and conditions will be the same as those under which the Commonwealth itself borrows the money. As the airline will be required to meet all charges under the loan agreement, the Commonwealth will, as usual, assume the function of an intermediary in these arrangements.

Drawings on the present loans will commence in August, when the first aircraft is due for delivery. In accordance with normal lending practice in. the United States, a commitment fee of one-half of one per cent per annum is to be paid on the undrawn amounts of both loans. The ExportImport Bank loan is to be repaid in 7 semi-annual instalments beginning 15th November 1975. The commercial bank loan is repayable in 10 semi-annual instalments beginning 30th June 1972.

Interest on the Export-Import Bank loan will be at 6 per cent. However, the lenders in this case have the right to sell the Commonwealth's obligations in respect of amounts advanced, at prices involving additional interest costs to the Commonwealth of up to a maximum rate of 7 per cent. The Commercial bank loan bears interest at a rate which is three-quarters of one per cent above the minimum commercial lending rate charged by Chase Manhattan Bank - at present 5.5 per cent - and will fluctuate with that rate. The terms and conditions of the loans have been approved by the Australian Loan Council, and I commend the Bill to honourable senators.

Debate (on motion by Senator Kennelly) adjourned.

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