Link launches bond funding

THE GROUP behind the much-delayed Channel Tunnel Rail Link is about to start raising funds for the project with the biggest ever loan of sterling outside the gilt market. However, a number of regulatory hurdles are due to be cleared first.

Construction of the first half of the 68-mile rail link will be financed by the issue of pounds 2.65bn of bonds guaranteed by the British Government in either two or three tranches.

Another pounds 1.1bn, also backed by the Government, will be raised later to pay for the construction of the second section, from North Kent to St Pancras in London.

The joint managers of the giant bond issues, Warburg Dillon Read and HSBC Markets, have yet to make a final decision on when the issues will go ahead, and how the bonds will be structured.

They have already obtained clearance from European Union authorities concerning state aid regulations. The managers are keen, however, to avoid any turbulence in the bond markets which might result from the introduction of the euro next week.

At the same time, Alfred McAlpine's Civil Engineering division said yesterday it had been awarded an pounds 80m contract in a joint venture with Amec to build part of the Channel Tunnel Rail Link, covering the section from the west bank of the Medway to Fawkham Junction in North Kent.

A consortium titled London & Continental Railways will build the entire link. Railtrack is set to buy the first section of the link for pounds 1.5bn when it is completed in 2003, and has an option to buy the second section in 2006.

The bonds will be fully and unconditionally guaranteed by the British Government as part of a revamped public-private partnership plan unveiled in June.

The original plan fell apart at the beginning of the year after John Prescott, the Deputy Prime Minister, rejected a request by LCR for an extra pounds 1.2bn of public money.