Comment: The persistently unfaithful husband errs again

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The Independent Online
It is always hard to write about Eurotunnel in anything other than a "we told you so" manner. Ever since its inception, this astonishing enterprise has stumbled precariously from one financial crisis to the next, its ability to stay in the game defying all rational analysis. It has become like the persistently unfaithful husband, each time promising "this really is the last time, it won't happen again" - only to err at the next possible opportunity.

Fortunately for them, most British investors didn't believe Eurotunnel when it last made this claim, shunning en masse a pounds 900m rights issue pitched at 265p a share. With another catalogue of broken promises now behind it, the shares yesterday closed at just 142p. For some at least, hope continues to triumph over experience, for it is hard to see how the shares can even be worth that. As yesterday's suspension of interest payments confirms, Eurotunnel is now classically insolvent, in the sense that it has to keep borrowing in ever-increasing amounts simply to fund its existing borrowings.

The ever-optimistic Sir Alastair Morton, co-chairman, would deny this, of course. Without any corrective action at all, according to Eurotunnel, the cross-over point will eventually be reached when revenue outstrips interest costs. Even on the company's own projections, however, that point is so far in the future as to make the claim simply not credible. Coming from a company with such a poor forecasting record, it is even less so. The time has now come to seek some kind of lasting, long-term solution. Even Sir Alastair accepts that.

How much will be left for existing shareholders at the end of it, is anyone's guess. Though Sir Alastair has ruled out another rights issue for at least two years, shareholders may eventually have to consider putting up more to salvage what little they have left. Sir Alastair's hope is that he will be able to avoid the sort of massive debt-for-equity swap that would swamp out the existing equity base. By rescheduling interest payments and debt, he hopes to muddle through until such time as the venture's credibility is sufficiently restored in international capital markets to allow a full-scale refinancing.

In essence, Sir Alastair is asking for yet another chance. Should bankers and shareholders give it to him? Oh, go on then, what's there to lose?

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