Eurotunnel dispute close to settlement

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The Independent Online
EUROTUNNEL and Transmanche Link, the Channel tunnel builders, could resume formal negotiations this week over their long-running pounds 1.2bn cost dispute amid fresh signs that a settlement is near to hand.

The two sides are understood to have reached agreement on virtually every element of the financial settlement. Under this, Eurotunnel would give TML pounds 300m in cash at 1985 prices and pounds 300m in 'non-cash' payments in the form of shares and other financial instruments such as loan notes and convertible shares.

This would involve Eurotunnel issuing fresh shares equivalent to 10 per cent of its share capital to the 10 construction firms that make up TML.

The one sticking point remains how soon the cash-starved contractors will be allowed to sell their shareholdings. At Friday's closing price of 471p , 10 per cent of Eurotunnel would be worth about pounds 250m.

Eurotunnel wants to force the contractors to hold on to the shares until the tunnel has opened next January and established itself.

However, the financial pressures on the contractors are such that they want to be able to dispose of the shares as soon as possible and certainly before Eurotunnel launches its next rights issue, which could be as early as December 1994.

Four of the five British contractors - Costain, Wimpey, Taylor Woodrow and Tarmac - are being forced to sell parts of their business to reduce debt, and analysts say that completion of the tunnel will mean a pounds 15m to pounds 20m cash outflow from each of the contractors this year.

The 10 contractors are understood to have held a meeting last week to discuss their position and sources close to the project believe the contractors may move to settle the dispute in the next few days.

Negotiations between the two sides broke down late last year and although discussions have continued since there have been no formal talks.

Unless the dispute is settled before the contractors issue their 1992 accounts, they are likely to have to make another provision against the contract this year.

BICC, parent of Balfour Beatty, is the first to report, on 3 March - which means the deadline for agreeing TML's accounts, in time for Balfour Beatty's share of its results to be incorporated, will in effect be the end of February. Jonathan Timms, building analyst with Charterhouse Tilney, estimates that unless a settlement is agreed, TML's accounts will show a pounds 120m loss for 1992, which means the 10 contractors will each have to provide pounds 12m - the same as last year. The contractors remain confident, however, that some of the provisions can be released when the dispute is settled.