Swiss Bank saves Eurotunnel issue: Deal on pounds 858m cash call reached despite earlier row - 150 bankers refuse to come in

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The Independent Online
SWISS Bank Corporation has come to the aid of Eurotunnel by agreeing to underwrite almost a third of the long-awaited pounds 858m rights issue which was launched yesterday.

SBC's dramatic intervention came despite a furious row a month ago when Sir Alastair Morton, co-chairman of Eurotunnel, lambasted Brian Keelan, an SBC executive, for boasting of his bank's key role in the financing programme and for predicting the rights issue would be as large as pounds 750m. Mr Keelan was barred from any further part in the deal.

After expenses amounting to pounds 42m, Eurotunnel will now raise even more - pounds 816m in cash.

The intervention of the Swiss turned a cliffhanger into a success. Market sources said SBC had underwritten pounds 270m of shares, 31.5 per cent of the total, far more than any other underwriter.

The bank is believed to have passed on well under pounds 100m to sub- underwriters in London, and is thought to be keeping the balance of around pounds 200m to sell later to Continental and other investors.

Market sources said SBC was betting that investors would see Eurotunnel as a a good buy now virtually all the construction had been paid for. The bank refused to comment.

The issue was slightly smaller than the maximum of pounds 900m that had been suggested because Eurotunnel's bankers raised a last- minute pounds 50m of extra loans from a small group of British and foreign banks, to add to the pounds 693m offered by the original banking syndicate. The extra cash is believed to have been found at the insistence of the underwriters of the equity issue.

It also emerged that as many as 150 of Eurotunnel's 220 bankers refused to join the pounds 693m loan but Sir Alastair said the smallest 120 lenders accounted for only 10 per cent of the debt. The balance has been made up from higher contributions from the remaining banks.

The extra pounds 50m has to be approved by the original banking consortium under the terms of its loan contracts.

Eurotunnel also announced it has provided a pounds 470m cushion of financing above its projected needs. This is on the assumption that warrants issued last year are exercised and leasing arrangements agreed for new rolling stock.

The underwriting was split roughly equally between London and Paris. With many private shareholders unlikely to take up their share of the rights, the underwriters are the key to the issue.

Sir Alastair said he expected money to come in from claims made against the British and French railways for failures to meet their promises. He said if completely successful this could bring in well over pounds 500m by 1998.

Andre Benard has decided for personal reasons to relinquish his positions as co-chairman of Eurotunnel and chairman of Eurotunnel SA. Patrick Ponsolle has been appointed his successor from July 1994. Sir Alastair is to continue as co-chairman, but part- time, for another two years. The shares closed 7p down at 348p.

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