Eurotunnel in cash plea to Major

Prospect of agreement with bankers recedes because refinancing needs 100% vote
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The Independent Online

Business Editor

Sir Alastair Morton, co-chairman of Eurotunnel, has demanded government compensation and other help for the financially stricken company in personal meetings with John Major, Kenneth Clarke, the chancellor, and Sir George Young, the transport secretary.

Announcing losses in the first half of the year of pounds 464.5m before tax, Sir Alastair confirmed he was campaigning for several billion pounds from three groups - the tunnel contractors, railways and the governments on both sides of the channel - which would be put towards paying off debts to banks.

Sir Alastair said: "In 1986-87 a deal was struck and it has not been delivered and it is costing us a lot. It is not a question of finding someone to blame but of insisting on our rights."

It also emerged that the prospect of an early agreement between Eurotunnel and its 225 bankers has receded dramatically because a refinancing plan will require a 100 per cent vote in favour.

The difficulty of getting every bank in a large syndicate to agree on complex refinancings has led to widespread introduction of majority voting in corporate loan agreements, to prevent chaotic and long drawn out negotiations.

But although an 85 per cent majority vote has applied in Eurotunnel's recent negotiations with banks, the new talks revert to the old basis of unanimity. Bankers fear this will give a powerful lever to small minorities of disaffected lenders.

Eurotunnel said it hoped to agree a financial package with its principal bankers by the end of January. But Sir Alastair made clear that approval by all the banks was unlikely before "well into mid-year at the earliest. You will find bankers saying longer than that."

Eurotunnel's auditors, KPMG and Befec Price Waterhouse, in a statement heavily qualifying the accounts, said that in the absence of a bank refinancing, shareholders' funds could be reduced to less than half of the equity capital before the end of the 18-month interest standstill period. The accounts were approved on a going concern basis.

Sir Alastair said total claims Eurotunnel was making against contractors, railways and the governments were "billions plural - more than two and then some". But the reaction of the prime minister, Sir Alastair conceded, was to "hope that it would go away".

Eurotunnel is waiting for the results of arbitration proceedings against the French and British railways and has lodged a new claim against TransManche Link, the tunnel builder, for alleged unreliability and high operating costs - which TML is resisting. Part of the claim against the governments is for a level playing field with the ferry operators on duty free concessions - which he called a disgraceful government subsidy for the ferries - and on safety.

Sir Alastair said Eurotunnel wished to "ensure that the safety requirements placed on the ferries are as onerous and costly as those accepted by us".

He also believed the two governments had not fulfilled commitments to develop infrastructure on both sides of the channel which were made when the project was conceived. If no help was forthcoming, he said the claims against the governments could end in arbitration.

Eurotunnel announced the creation of two consultative shareholder committees, in France and Britain, and appointed Maurice Le Maire, a former executive of Total, as shareholders' representative on the board. Mr Le Maire's family holding of 60,000 Eurotunnel shares has lost pounds 140,000 in value from this year's high.

Sir Alastair said there had been no request from bankers for a debt for equity swap, which he said would only be a last resort. However, it is believed that the refinancing could include bonds or warrants issued to the banks and convertible into equity at a later stage if Eurotunnel's performance does not improve.

He added: "In the longer term, the bankers will get their money back and our shareholders will do very well. But not very soon."