Do I remember correctly that this song was not planned for the album?
What I heard is that David Knopfler actually composed the melody. The Am7, C, G, F7 progression was all his idea. And Mark wrote the lyrics.
I'm not sure about this, though.
it's not exactly that David composed the melody, it is just that when the two brothers played togetther on acoustic guitars few years before dire straits, they were improvising and some ideas came up. when during 1st album recording sessions, Mark had to wrote another song to complete the tracklist, David suggested him to use one melody they had improvised some years before
its' explained in the Oldfield book