Outlook: Eurotunnel develops taste for financial engineering

EUROTUNNEL RIGHTS issues are generally greeted with the same enthusiasm reserved for French blockades of the Channel ports. The last one in 1994 had the dubious distinction of being so badly received that the market price of Eurotunnel shares fell virtually to the level of the deeply discounted rights. But that was when Eurotunnel was a basket case and in desperate need of more cash just to complete the construction phase.

Five years on, Eurotunnel's rehabilitation is hardly complete, as underlying losses of pounds 215m remind everyone, but at least there is light at the end of the tunnel.

Eurotunnel prospectuses have a proud tradition as works of fiction, so we shouldn't perhaps expect too much from this latest attempt to tap the market. Even so, this seems a reasonably promising initiative. Shareholders are being invited to stump up funds so that the company can buy back a chunk of its debt at half face value. The net effect will be to reduce interest payments and thereby bring closer the day when the Channel Tunnel breaks into profit.

It may seem like a zero sum game to cough up for more shares now with a promise that it will bring the first dividend payment nearer. But if only Eurotunnel had been as skilled at civil engineering as it is becoming with financial engineering, then that might not have been the sort of choice facing shareholders.

Eurotunnel's grand debt restructuring in 1997 halved its pounds 8.5bn debt mountain overnight and introduced us to some exotic new forms of paper that even the investment bankers struggled to understand. But the one crucial thing it achieved was to free the company from the yoke of compound interest, allowing it to chip away at its remaining debts without having to worry about interest being added to the interest.

That is not to say Eurotunnel's troubles are behind it. The thought of Eurotunnel submitting proposals for a second link will produce wry smiles among those bankers who sank billions into the first one, and are still waiting for it to break eve

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before