Eurotunnel ready to take passengers: Announcement of plans to start service next month may boost share price

EUROTUNNEL gave some good news to its anxious City underwriters yesterday when it said all the main tests for the Eurostar passenger service had been completed.

It expects to make a formal application for an operating certificate later this week, and British and French railways are likely to begin services next month.

The Eurostar move emerged as underwriters for the pounds 858m rights issue anxiously awaited the opening of the stock market today. If falls in the share price last week continue they could be left picking up a large part of the tab.

Eurotunnel said '99.9 per cent' of the tests on the Eurostar service had been cleared by the two governments as they went along. The documents now had to be formally submitted for approval.

Eurostar services to and from the Continent are to begin, like the freight shuttle, as an 'overture' service, probably invitation only. A spokesman said: 'We are not quite sure how we are going to ration the available capacity.'

He added that a doubling of the weekday freight shuttle to two an hour was expected soon. 'It has been heavily subscribed with 95 per cent of the capacity we have made available taken up.'

The rights issue closes on Wednesday afternoon and many small shareholders, who own 55 per cent of the stock, are thought unlikely to pay for their new shares.

Eurotunnel fell to a 1994 low of 288p on Friday, only 23p above the price of the rights issue. It was announced in May at a discount to the then market price of 25 per cent, but the margin has now shrunk to 8 per cent.

Company sources said that in the previous rights issue in 1990 the shares bounced just before the issue closed, helped by the announcement of the meeting in mid-Channel of the British and French sides of the tunnel.

But even if the news of the start of passenger services helps the price, market sources believe the key to the next 48 hours is in the positions held by underwriters.

The French authorities are investigating allegations that some underwriters sold Eurotunnel stock short - selling shares they did not own - before the rights issue price was fixed, to drive the price down. City sources cite large recent borrowings of Eurotunnel shares as proof.

Others say Eurotunnel's best hope is that these institutions will need the rights issue shares to fulfil their commitments, which could put a floor under the price today.

(Photograph omitted)