COMMENT: Banks must bear part of the Eurotunnel blame
'French banks might be of the same view as their Anglo-Saxon counterpar ts but they couldn't possibly admit to it - they would have a riot on their hands'
Tuesday 30 April 1996
For long suffering-shareholders in Eurotunnel, his observation holds particular meaning. Essentially bankers have controlled Eurotunnel for years now, only they are not admitting it. To do so would be to concede their part in the tunnel's financial mismanagement. That in turn would lay them open to a whole raft of litigation from angry, mainly French, shareholder action groups. With good reason, shareholders believe they were misled into throwing good money after bad. In their search for retribution, they are prepared to sue anyone with the money to pay.
Only the law courts and history can decide for sure whether bankers are culpable, but on the face of it they would appear to bear a large part of the blame. What makes matters worse is that they are now trying to oust one of those attempting to salvage something for shareholders from the Eurotunnel wreckage - Sir Alastair Morton. On the opposite page, Roger Byatt, deputy chief executive of NatWest Markets, is unmasked as the main protagonist in this campaign. NatWest is head of the banking steering group, so it can be assumed that even if Mr Byatt doesn't talk for others, his views carry some weight. The inference is obvious: Sir Alastair is a difficult and obstinate character who stands in the way of a settlement in which the interests of shareholders are swept aside for the greater good of the banks.
The morality of this is one thing. But it is also dangerous ground commercially. Eurotunnel is not like any old British insolvency in which bankers tend to ride roughshod over other creditors. It is an Anglo-French collapse, and a highly political one at that. French banks might be of the same view as their Anglo-Saxon counterparts but they couldn't possibly admit to it - they would have a riot on their hands. Furthermore, the French courts would be unlikely to back them in any head-to-head confrontation with the army of small French shareholders misled into this nightmarish adventure.
To all intents and purposes, bankers have been behaving like shadow directors of Eurotunnel for years. To those who know him, the idea of Sir Alastair as a ventriliquist's dummy for Eurotunnel's bankers may seem like an absurd one but there is no doubt they were all in it together when the capital markets were persuaded to cough up the necessary equity. By campaigning to remove someone who has become an awkward obstruction to the pursuit of its own self interest, NatWest is dangerously close in law, as well as in fact, to what the French call an "administrateur du fait" - a shadow director. If that can be proved, then NatWest is going to get sued. Many might think the special protection this affords Sir Alastair's position unwarranted. But so long as bankers so transparently seek his removal for their own purposes they deserve every writ they get. Sir Alastair remains shareholders' best hope of securing a reasonable deal. Bankers should not be allowed to oust him.
BT and Cruickshank as far apart as ever
When a company with a monopoly market position solemnly tells its regulator that it really is time he stopped screwing its prices into the ground so that fledgling rivals are given enough headroom to take a crack at the market, then the words rat and smell spring to mind. Don Cruickshank certainly seems to have made the connection anyway, which is one reason why he has decided to play hardball with BT over its new pricing formula.
BT's argument is that Oftel's proposed new price controls will not so much tilt the playing field as raze all the players to the ground. Worse, Mr Cruickshank has more than moved the goalposts, he has brought an entirely new set of woodwork on to the pitch by linking agreement on price controls with formidable new powers to tackle anti-competitive behaviour. It's enough to make you go off go and buy a stake in the television empire of a former Italian Prime Minister. Take a tip from Silvio Berlusconi - they know how to handle regulators over there in Italy.
But seriously, does Mr Cruickshank genuinely think BT will cave in or has he already pencilled in his diary for the next year with the initials MMC prominently featured? We are now just four weeks away from seeing the colour of Mr Cruickshank's final proposals and the two sides look as far apart as ever. Ultimately, this is not an agument about figures, though the differences here are big enough. It is more about philosophies - one which says that BT's domination of the market is sufficiently overweening to merit price control for the foreseeable future and one which says that competiton, not regulation, is the best safeguard of consumer interest.
Stand-offs such as these are not uncommon when regulator and regulated industry clash and we may yet see an eleventh hour rapprochement. The choice for BT is not easy. Accepting a price formula it cannot comfortably live with would weaken its hand in future dealings with Oftel, quite apart from making the merger with Cable & Wireless even harder to stack up financially.
Submitting to a year-long investigation before the MMC would not be a picnic either. As British Gas discovered to its cost, the MMC can prove a rather harder taskmaster than the industry regulator. Quite a conundrum. Both sides would be well advised to compromise their positions. Nobody wants to see BT go the same way as British Gas.
What Towers might have said to BMW
Dear Bernd, Sorry to drop you in it like this but as you know I've been thinking about moving on for over a year now and, well, what with Euro '96 coming up and all what better time to take a spot of gardening leave? I appreciate the extra pounds 1bn you are giving us here at Rover to update the model line. (German accounting rules eh?? Only joking!) I also appreciate the way you've mapped out the future for us.
But that's actually the problem. Those guys around at British Aerospace may not have known much about cars unless you could mount an anti-tank missile on one. But at least they gave me my head when they were in charge. These days things are, how can I put it, a little too predictable. What will I do now? Who knows. Remember that guy who sold you the business for pounds 800m (still seems a remarkakable sum even now, don't you think). Well, he's leaving Lucas in a few months and its only one junction away along the motorway. Then there's Smiths Industries of course - I'm sure I won't go short of offers. I gather that you'll be looking outside for my replacement. Good luck and I hope you find someone who still remembers the Riley as fondly as you. Yours John.
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