View from City Road: Eurotunnel drops into the safety net

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The Independent Online
Like the Red Queen, Eurotunnel managed something impossible before breakfast - though only just, as it was after dawn when the lawyers sorted out final details of the tunnel's pounds 1.6bn package of rescue finance.

Within hours, Sir Alastair Morton, the co-chairman, was reeling off a list of credits to the supporting cast who helped to put his show back on the road.

Top of his list was Roger Byatt, deputy chief executive of NatWest Markets, the banker who played the key role in whipping the consortium of lenders into place. The whole exercise would have fallen apart, and Eurotunnel have gone bust, had the banks not dug deep into their pockets.

It might have failed again on Wednesday when the stock market plunged, but God and Swiss Bank Corporation - the biggest underwriter, and a supporter for the shares in the market - were on the company's side. Its own price stabilised.

With Warburg using all its muscle to call in old favours from institutions, the underwriting and sub-underwriting process was completed yesterday. Eurotunnel now has a couple of years' breathing space to prove its revenue forecasts are right.

After the financing, there is a pounds 470m cushion over and above forecast cash needs, though this is not as comfortable as it seems because it assumes warrants issued last year but not underwritten will be exercised, as well as the arrangement of leasing finance for new rolling stock. Despite the cushion, Eurotunnel is still largely a question of faith. With all the ebullience of professional salesmen, its senior executives rubbish revenue forecasts that do not agree with theirs, notably the 'inadequate and inconsistent' forecasts by the railways. They also quibble with their own consultants, who do not think the lorry service will grow as fast as Eurotunnel expects.

The important point, however, is that the money has been raised and the service is operating. It is almost a waste of effort now to do any more forecasting. Better to watch which way the traffic flows divide on the M20 at Folkestone over the next 12 months - on towards Dover or down to the tunnel.

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