French MPs demand Eurotunnel inquiry

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The Independent Online
Concern about the financial crisis at Eurotunnel intensified yesterday as French MPs demanded a parliamentary inquiry, and further details emerged of the banks' exposure to the Channel tunnel operator.

Calls for an inquiry came from the ruling coalition UDF party and the opposition Mouvement des Citoyens. "We want a classic inquiry commission which will have to examine all the aspects of the problem," said Dominique Bussereau, chairman of UDF's transport commission.

The government had ruled out intervention and an inquiry seems unlikely, but the call underlines the growing unease in France, where most Eurotunnel shares are held.

On Monday, a shareholders' action group demanded the shares be suspended to prevent further huge losses by private investors.

Peter Snape, a member of the House of Commons all-party Channel Group, said he would be surprised if a UK commission of inquiry was set up.

The deepening concern comes after Eurotunnel last week suspended pounds 2m- a-day interest payments on its junior debt for 18 months. Standard & Poors, the rating agency, yesterday said that French and Japanese banks were most exposed to future restructuring of the pounds 8.5bn Eurotunnel junior debt. On Tuesday the Independent disclosed that NatWest, the lead bank, had outstanding loans of about pounds 277m, Midland pounds 250m, and Barclays more than pounds 130m. However, some of this money will be senior debt, which is not affected by the suspension of interest payments.

While French banks hold around 20 per cent of the debt, and Japanese banks 20-25 per cent, S&P said that it believed that no one bank had over 5 per cent of the total junior debt. This means, said S&P, that no individual exposure could be above pounds 416m.

Japanese banks are expected to make provisions in 1996, but the absolute amount for any individual bank will be manageable relative to earnings, S&P said. The agency believes the economic upturn will help banks absorb potential provisions. "Nonetheless," S&P said, "Eurotunnel's suspension of interest-rate payments represents another problem for a banking system struggling with low margins and declining asset quality."