The loss of almost a quarter of its stock market worth since Monday morning was caused by Eurotunnel'sadmission that it could be overwhelmed by £8bn bank debts, which would drive the company into the arms of its bankers.
The fall puts at serious risk £50m of new funds to be raised in June through the conversion of founders' warrants, issued in 1986 and exercisable by 30 June, priced on a combined sterling and franc formula.
The exercise pricewas long thought to be so low compared with Eurotunnel's share price that the company would have certain access to the money. But at 201p at last night's exchange rates the exercise price is 15p above the latest Eurotunnel share price, which makes the warrants worthless unless the price recovers.
The founders' warrants, each of which converts into 11.2 Eurotunnel shares, more than halved in value from 600p to 275p. They maintained some value because of the volatility of Eurotunnel's share price.
Another batch of warrants, issued in 1993 and due to raise £150m, are exercisable by October but are now so far below the exercise price of around 300p that they appear to be a lost cause, with Eurotunnel unlikely to see the money.
The risk that the £150m warrants would not be exercised was taken into account by Eurotunnel's auditors. They said in a note to the 1994 accounts that the company's funding requirements could be met into the second half of 1994, even if the 1993 warrants were not exercised. However, they made no mention of the £50m founders' warrants in this calculation.
The secondary market traded debt of Eurotunnel was also marked lower in the wake of the group's statement on Monday.Reuse content