Eurotunnel pounds 858m rights issue looks set to succeed

EUROTUNNEL'S pounds 858m rights issue, crucial for the financial viability of the project in its present form, appeared last night to have been a far greater success than expected.

The success of the rights issue, despite the preponderance of small shareholders and the fact that Eurotunnel does not expect to pay a dividend until 2003, has been a vital plank in resolving the company's second debt crisis with an overall pounds 1.6bn refinancing.

With Eurotunnel shares closing 3p higher at 279p in London, compared with the rights subscription price of 265p, it seemed likely that there had been a fairly substantial take-up of their rights by British investors.

Fears that the share price, under pressure before and after the announcement of the rights issue last month, would fall below its rights subscription price and leave the issue in the hands of its British underwriters have proved wide of the mark.

Speculation last night was that as little as 10 per cent of the British half share of the Eurotunnel issue may have been unsubscribed, although an earlier estimate put the figure at 20 per cent.

In these circumstances SG Warburg Securities, brokers to the issue, would arrange to place the unsubscribed portion with institutional investors.

Any profit from the difference between the subscription price and share price would be for the benefit of shareholders.

The issue was underwritten in Britain by Morgan Grenfell, Swiss Bank Corporation, Banque Paribas, Robert Fleming, Salomon Brothers and SG Warburg.

In France, which has 43 per cent of Eurotunnel shareholders, the element of the cash-raising exercise closed yesterday afternoon amid indications that between 97 and 98 per cent of the French tranche had been taken up.

Jean-Michel Plou, of Banque Indosuez, said that as Eurotunnel shares finished trading in Paris at Fr25 compared with a rights subscription price of Fr22.50 he expected that only 2 or 3 per cent of the French element of the issue would not be taken up.