Eurotunnel rights issue ready after 11th hour deal

EUROTUNNEL is expected to announce an pounds 850m-plus rights issue this morning, after confirming that its bankers had formally signed up for their part of a pounds 1.6bn refinancing.

The company is understood to have reached conditional agreement with French and British institutions to underwrite the shares, in an 11th-hour deal that looks set to pull the project back from the brink.

At about 265p a share, giving the expected discount of 25 per cent to yesterday's closing price, the company should be able to raise just over pounds 850m in a three-for-five issue. That would use up 321 million of the 342 million shares it has permission to issue, leaving little more room for manoeuvre.

The banks' agreement depended on the underwriting going ahead and came during a frantic day in which the company and its advisers tried to pull all the elements of the financing together as the stock market fell heavily. Short of another dramatic sell-off in the markets, advisers were poised to reveal the details.

Progress came after the sharp fall in share prices had little effect on Eurotunnel itself, which closed down 5p at 355p after what dealers said was unexpectedly high volume.

If the company's shares had fallen much further it would have made it impossible to raise the full amount required without further narrowing the discount.

As the stock market plunged there were fears that the rights issue might have to be pulled, but these abated as the market stabilised - although after past Eurotunnel crises the City was waiting to see the documents before it believed it.

A Eurotunnel spokeswoman said the signing proceeded during the day at a City law firm, with bankers arriving individually. She said the process would be completed by the end of the day but refused to confirm that the amount was the expected pounds 700m.

At that level, shareholders will need to provide between pounds 850m and pounds 900m to fulfil Eurotunnel's cash needs, bringing the total it has raised to pounds 10.6bn.

Some institutions remained sceptical about the issue, saying it would still be a tough to get it through. The size of the discount indicates the extent to which underwriters are expected to pick up the shares themselves.