Shares in Eurotunnel jumped almost 7 per cent as dealers reacted to upbeat trading figures from the Channel Tunnel operator and worries about the ferry companies.
Eurotunnel, currently in talks with creditor banks over pounds 8bn of debts, more than doubled tourist and freight traffic last month compared with January 1995. The figures appear to underline last month's claim by Sir Alastair Morton, co-chairman, that Eurotunnel would see a 50 per cent rise in revenues this year. Shares rose 5p to 79p.
Eurotunnel's Le Shuttle tourist service handled 96,971 cars, motorbikes and caravans in January, compared with 45,352 in January 1995. Le Shuttle Freight carried 45,763 trucks last month, 10 per cent up on December and more than 50 per cent up on January 1995, when the figure was 20,739 vehicles. The number of Eurostar trains through the tunnel - for which Eurotunnel receives a fee - more than trebled to 1,071 last month.
In a move that will intensify the competition with ferry companies, Eurotunnel said it expected to increase freight capacity by more than 50 per cent in 1996.
There is speculation that either P&O or Stena will pull out of the Dover- Calais crossing. Some analysts believe that ferry companies could do a deal, in which one would pull out of Dover in return for dominance on North Sea routes to Ireland.
Meanwhile, Eurotunnel faces hard bargaining with its banks and must agree preliminary proposals by mid-March. A progress report is expected within two weeks.
Attention is turning to the likely provisions UK banks will make against Eurotunnel exposure, which analysts have put at between 30 and 50 per cent. Hugh Pye, of UBS, believes banks could over-provide given that earnings are improving and exposure to property bad debts decreasing.