THE prospectus seeking shareholder approval for Eurotunnel’s financial restructuring, published on May 29, says that if the company’s objectives are achieved it will make a profit after tax in 2005 and pay a dividend in 2006. A more pessimistic scenario would delay the first dividend until 2010.
The complex deal worked out last October would see 55% of the £8·6bn junior debt converted into equity, or debt attracting much reduced interest over a longer payback period (RG 11.96 p699). Should it be rejected by shareholders on July 10, the directors see ’no reasonable prospect of avoiding insolvency procedures in the UK and France’ which means that shareholders ’would be unlikely to receive any return on their investment.’
The second stage - approval by every one of the banks involved - looks easier now that American banks have bought debt from a larger number of mainly Japanese banks, reducing the total number in the syndicate from 225 to 174. The Americans are believed to have paid around 45% of face value for the debt.
Full freight shuttle service resumed on June 15, seven months after the fire which severely damaged the tunnel lining. However, the two governments have yet to respond to a request to extend the concession by a ’significant’ amount, which Eurotunnel believes would encourage shareholders to vote for restructuring.
The prospectus projects Eurostar passengers growing to between 12·0 and 15·5 million in 2006 compared with 4·9 million last year; the higher figure assumes that the Channel Tunnel Rail Link is open in 2004. A gloomy prognosis for rail freight growth would see last year’s 2·4 million tonnes rise to between 3·2 and 4·4 million in 2006. o
Work starts on CTRL
LAST month saw utility diversions commence for Britain’s 108 km Channel Tunnel Rail Link, which is due to open at the end of 2003. Seeboard is diverting high voltage cables so that Union Railways, a subsidiary of London & Continental Railways which won the CTRL concession last year, can tunnel under the A2 trunk road near Gravesend.
All five main tunnelling contracts, valued at £800m in total, are out to tender. Bids for the first were received on June 6; worth £300m, it covers construction of the 1 km long open box containing Stratford station and 10 km of tunnel to Ripple Lane beyond Barking. UR said it expected to put a further £500m worth of contracts out to tender in the coming months.
In each case, a ’preferred contractor’ will be selected to work alongside teams from UR and Rail Link Engineering, a joint venture formed by LCR’s engineering shareholders. Their task will be to refine the design and settle programming and cost issues.
While some long lead time expenditure by the partners is unavoidable, major contracts will not be confirmed until the LCR flotation, now scheduled for ’early-mid 1998’. The success of this is linked to efforts by another LCR subsidiary, Eurostar (UK) Ltd, to turn substantial losses into profits that can be used to fund part of the £3bn CTRL. o
