Investors face pounds 800m Eurotunnel call: Crisis deepens as funding deadline is missedPressure grows on Japanese banks to take up loan burden

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The Independent Online
EUROTUNNEL is considering asking shareholders for well over pounds 800m in new equity next month, at least pounds 200m more than it admitted it needed six weeks ago.

The sharp increase emerged as the project's leading bankers and the Bank of England, liaising with the Japanese Ministry of Finance, mounted a last desperate effort to persuade Japanese banks to provide their full pounds 160m share of a new pounds 700m loan.

Hopes have been raised by the agreement of one of Japan's biggest banks as well as a few of the smaller ones. Encouragement was also found in the fact that many other Japanese banks had not replied by last night's deadline. One bank said there was still a realistic prospect of Japanese support.

Bankers stressed that the deadline was not the final one, simply the date by which banks had been asked to respond.

The next few days will be spent in an intense effort to prise answers from those that have not replied. US banks are also being canvassed for more money, but are unlikely to plug the whole gap.

If a large shortfall on the loan target of pounds 700m remains, it would seriously undermine efforts to raise capital from shareholders. Banks would be forced to look at the whole structure of Eurotunnel's finance and even the possibility of deferring interest payments in a debt rescheduling if the rights failed to go ahead.

Eurotunnel needs to begin fund-raising by the end of this month or it will run out of cash.

There is growing market resistance to contributing extra equity simply because bankers are not meeting their own targets. One senior investment banker said: 'Don't expect shareholders to plug the gap left by the commercial bankers.'

Eurotunnel has accepted that the difficulty of bringing all the banks into line makes it almost impossible to increase the debt portion of its refinancing, so additional funds to make up the planned total of pounds 1.5bn to pounds 1.6bn must come from shareholders.

In early April, Sir Alastair Morton, co-chairman of Eurotunnel, said the amount of equity needed was nowhere near pounds 750m, and suggested a pounds 500m to pounds 600m range.

Eurotunnel's board is looking at whether to give itself more elbow room if start-up and running costs prove higher than expected. It is already planning to raise more money than it expects to spend under, but this cushion could be increased - and may be used as a justification for the higher call on shareholders.

New estimates yesterday forecast a shortfall of about pounds 200m in revenues in the first three years of operation, compared with estimates last year. The company also said shareholders could not expect the first dividend until 2003.

The latest revenue estimates by Eurotunnel's independent traffic and revenue consultants put the shortfall - due to delays in the start of services - at more than pounds 100m this year, pounds 63m at 1994 prices next year and pounds 32m in 1996. Eurotunnel said that the consultants' estimates were more pessimistic than the company's.

It has received permission to start freight services this week. The Le Shuttle freight service will begin on Thursday on a limited basis, followed by freight trains operated by the national railways. A full service will be phased in by mid-July.

Eurotunnel expects shuttle services for passenger vehicles to begin in July, but again on an invitation-only basis. People will not be able to turn up in their cars and travel until October.

Yesterday, the company said that by 1996 it expected to capture half of the total cross-channel car and coach passenger traffic.

Eurotunnel also said it had reached agreement on charges with freight operators that account for almost 80 per cent of the accompanied cross-Channel ferry market.

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