View from City Road: Swiss headache in the Channel tunnel

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It will be a sleepless weekend for Swiss Bank Corporation and some of the other underwriters of the Eurotunnel rights issue. They could yet be forced to pick up a large chunk of the shares if the price continues to slip in the way it has been. The issue closes on Wednesday afternoon.

For the London market, where the risk was split up and spread around numerous sub-underwriters in the conventional City way, the pain will be bearable. The greater difficulty is for the French-style underwriting. In Paris, it is normal for banks to keep a substantial part of the risk themselves. According to one of those involved, it would not be unusual for a bank to keep as much as 85 per cent of the underwriting on its own books and distribute the rest to a handful of other banks.

One market source estimates that SBC, which took the largest single chunks of both the British and French underwriting, could have as much as pounds 150m of Eurotunnel underwriting still on its books.

SBC underwrote nearly pounds 100m each of the French and British issues plus another pounds 75m as part of a previous agreement with TransManche Link. But it is thought to have kept much of the French and TML chunks. If it is forced to pick up the shares next week, SBC will certainly have justified its fees for underwriting almost a third of the issue on the crucial night the deal was agreed. They may yet be saved by the bell, however. The rights were trading at only 13p last night, but by Wednesday it may have changed. In the topsy-turvy world of Eurotunnel, anything is possible.