Banks face pounds 750m Eurotunnel bill

The financial crisis surrounding Eurotunnel deepened last night when it emerged that the banks may be forced to repay the whole of a pounds 750m package of loans made by the European Investment Bank.

Sources said a syndicate of about 60 to 70 banks had guaranteed the EIB loans, which have been paid in stages since 1987. Repayment was triggered when Eurotunnel defaulted on interest payments earlier this month.

The pounds 750m figure is more than twice the size originally thought, and will put further pressure on Eurotunnel's 225 banks to complete the current financial restructuring. Eurotunnel itself - led by co-chairman Sir Alastair Morton - is unaffected by the EIB's move for repayment, as it was guaranteed the loans by the banks.

Under the EIB arrangements, the banks agreed to guarantee the money until the tunnel reached a level of financial stability. After this, the full risk of investment would transfer back to the EIB, removing liability from the banks.

It is unclear when the EIB will seek repayment, though it is likely to be months rather than weeks. The situation is complicated by the current restructuring talks, of which the EIB, thought to be Eurotunnel's largest lender, is a crucial part.

Nevertheless, the need to repay the money has alarmed many banks, especially the Japanese lenders, which account for some 25 per cent of Eurotunnel's pounds 8bn debts.

The EIB has a further pounds 300m loaned to Eurotunnel, though the bulk of this is senior debt and so unaffected, because the interest payment suspension affects only junior debt.

Eurotunnel yesterday would say only that the EIB "remained committed to a long term role" in the project. The EIB itself said the organisation had agreed to loan up to pounds 1bn, the money being paid over a number of years. An EIB spokesman confirmed that repayment was triggered by the default on interest payments, but would not be drawn on the timescale.

As the banks ponder the unexpected early repayment of the loans, they have been paving the way for Eurotunnel shareholders to shoulder more of the pain. A letter to Eurotunnel bankers from the agent banks describes Eurotunnel refinancing proposals put to them earlier this month as "unbalanced and unacceptable." While the banks are bearing the pain, there is no "defined pain" for other stakeholders.

The letter says: "We continue to be of the opinion that any pain must be share by all stakeholders. We question whether it is reasonable to expect the banks to assess the amount of pain that they should take without a clear idea of what contributions [if any] might be expected from other interested parties."

The letter adds that the company presented to the lead bank a three-year plan for the 1996-1998 which showed much lower revenue forecasts in these years than previously assumed by the company.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Christine McCleave: FP&A Analyst

£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn