Eurotunnel banks hopeful

Lead bankers to Eurotunnel believe that they will be able to win agreement from the other 220 banks in the company's lending syndicate to a new drawing of cash next month, as part of loan arrangements signed last year.

After fears arose in the markets of a new rights issue to make up for a threatened cash shortfall, the company said the expected drawdown from the banks did not involve any issue of shares.

In the City there is a widespread belief that Eurotunnel will eventually have to come back to shareholders for more cash after its £850m rights issue last year, which was accompanied by new loans from the banks.

But bankers said that there was no point in discussing another financial restructuring for the company until it was clear whether revenues would meet targets over the summer tourist season.

Revenues so far this year have fallen well below target, and if this continues through the peak season a new refinancing could be hard to avoid.

Eurotunnel has agreed the conditions for drawing down the next stage of its loan facilities with the four agent banks, NatWest, Banque Nationale de Paris, Crdit Lyonnais and Midland.

The agents have endorsed the cash handover and at recent meetings have advised the other banks to accept. This is despite the fact that a £300m cash-raising later this year, essential to keeping Eurotunnel within its loan covenants, is at risk because of the company's low share price.

Conversion of warrants on Eurotunnel shares - to produce the £300m cash in the autumn - will depend on the price remaining above the exercise price of 300p. But yesterday the shares slipped another 10p to 233p.

A banker involved in the discussions said Eurotunnel shares were volatile, depended on the summer season results and could also rise if the stock market as a whole moved upwards, so it was too early to come to the conclusion that the warrants would not be exercised.

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