The Bluffer's Guide: Eurotunnel

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The Independent Online
In the news because: It is announcing its preliminary results tomorrow. Analysts expect a full-year net loss of between pounds 670m and pounds 900m, on a turnover of just pounds 280m.

Status: Anglo-French proprietor of a hole linking the two countries. A great of money has disappeared down it, although it also has a train line.

Beginnings: Born 10 years ago after the British and French governments agreed that a tunnel should be built. Margaret Thatcher, the prime minister, insisted that the private sector should fund it, and enough private-sector banks agreed to get it under the ground.

Product: Apart from the hole, which earns Eurotunnel fees from users, it runs Le Shuttle, which carries vehicles through on trains. It does not own the Eurostar passenger trains.

High point: 6 May 1984, when the Channel Tunnel was opened. Also, perversely, now, because the tunnel seems to be winning in its cross-Channel battle with the ferry companies. Le Shuttle traffic is doubling year-on-year, as the customers enjoy a price war.

Low point: Which one? Perhaps last September, when Eurotunnel suspended payments on its loans. Perhaps tomorrow: its losses will be among the largest ever recorded by a private company in Britain or France. It has debt of pounds 8.7bn, shared between 220 banks, although some have been selling their shares off at huge discounts. Eurotunnel shareholders have invested more than pounds 2.5bn and seen the value of their investment crash. Shares came close to pounds 9 in 1989 - now they are 62p.

Owners: Theoretically the shareholders. But the creditor banks have a huge claim on the company.

Managers: There is a UK and a French chairman. The UK boss is actually a South African, Sir Alastair Morton. The adjective "abrasive" sticks to him as "troubled" does to Eurotunnel. But without him the company would probably have sunk by now.

What went wrong: Cost overruns, arguments with the builders, technical problems, lower toll earnings than expected. Perhaps, above all, wild early optimism among the banks.

Light at the end of ... : The best bet is a realistic restructuring agreement between the banks and shareholders, which could be arranged this year. An immense amount of highly-paid ingenuity has been put into sorting this out. Mediators (Lord Wakeham is one) have been appointed under French laws to work out which side should lose least.

Darkness at ... : If no agreement is reached, Eurotunnel could be declared insolvent.

And then: History is littered with monuments that have bankrupted their builders (the Palace of Versailles, Canary Wharf). But they do not collapse as a result, and people will be travelling through the tunnel long after its initial backers are in their graves.

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