Eurostar's pounds 1bn flotation on track as traffic returns

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Preparations for the pounds 1bn flotation of the Eurostar train operator, London and Continental Railways (LCR), are to begin early next year following its quicker-than-expected recovery from the Channel Tunnel fire last month.

Passenger numbers are back to 65 per cent of their level before the fire and Eurostar expects traffic levels to be fully restored by January. Some 65,000 passengers will travel between London, Paris and Brussels on the service this week and Eurostar expects traffic levels to rise to 100,000 in Christmas week with the help of special promotions such as a pounds 69 same- day return fare. Before the fire on board a Eurotunnel freight shuttle, Eurostar was handling 100,000 passengers a week.

The proceeds from the flota-tion will be used to fund the construction of the pounds 2.8bn Channel Tunnel high-speed rail link into London's St Pancras station. LCR, whose shareholders include the Virgin Group, SBC Warburg, National Express and Bechtel, was selected for the project earlier this year.

A further pounds 1bn-pounds 1.5bn of bank debt will need to be raised while the Government is committed to providing pounds 1.4bn of taxpayers' funds. However, none of the public subsidies will be available until the 68-mile link is two-thirds built.

Construction will begin in mid-1998 and the line is scheduled to open in 2003. It will cut 35 minutes off journey times, meaning that Brussels will be just a two-hour train ride away and Paris will be reached in 2 hours 15 minutes.

The flotation is expected to take place in early 1998 in conjunction with the raising of debt finance from an international syndicate of banks.

Adam Mills, chief executive of LCR, said Eurostar was on the "curve to profitability" but it was unlikely to be in profit before the flotation. Passenger numbers this year will top 6 million compared with 3.4 million last year but Eurostar is reckoned to need about 10 million passengers to break even.

Mr Mills said the fund-raising exercise would be a challenging one in the light of the experience of the Channel Tunnel which cost Eurotunnel pounds 10bn to build and opened more than a year late.

"It would be difficult to raise funds of that kind anywhere and at any time and there will be a view that this is in some way linked to Eurotunnel."

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