Morton to rule out further Eurotunnel rights

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The Independent Online
EUROTUNNEL'S chairman, Sir Alastair Morton, will today rule out another rights issue while the company is in breach of its banking covenants as the Channel tunnel company announces its half-year results.

But he will confirm that Eurotunnel needs to renegotiate the covenants and that its revenue targets will be about pounds 40m short.

Investors, worried that the latest financial troubles will yet again delay dividend expectations, will be given cautious encouragement about the time of future payments.

Delays in starting services mean expected revenues for this year will be only around pounds 97m, well down on forecasts.

However, a source said Sir Alastair will be able to report that demand for freight services has been strong, despite a poor August. 'I think we will see expressions of profound disappointment, but also some very encouraging signs,' he said.

'Providing Eurotunnel can maximise revenues next year the effect of these latest problems will be negligible.' Eurotunnel has talked of paying dividends in 2003/04 and Sir Alastair is expected to be reasonably encouraging about keeping to that timescale.

He is likely to treat the breach of covenants as a technical matter.

Analysts are aware that this is not the first time a breach has occurred and as before expect the banks to agree waivers.

Concern about Eurotunnel's finances intensified last week when Graham Corbett, finance director, said delays in starting services meant the company would not meet forecasts made in the prospectus or the rights issue earlier this year.

The Stock Exchange immediately asked for clarification as the remarks were made during the company's close season. Eurotunnel admitted the comments were indiscreet but the Stock Exchange is taking no further action.

Eurotunnel had forecast losses of pounds 382m for 1994 and pounds 473m for 1995, and a 1996 profit of pounds 289m. But the six-month delay in starting services means those estimates are out of date.