Eurotunnel shares slump on fears of new financial crisis

NIGEL COPE

Shares in Eurotunnel, the troubled Channel tunnel operator, slumped 28p to 138p yesterday amid rumours that the company was facing a fresh financial crisis and considering a new round of fund-raising.

The shares were heavily traded in Paris, where the rumours started, and the jitters over the stock spread to London

The plunge in the shares forced Eurotunnel to issue a statement after the stock market had closed, denying that it had any plans to raise new capital.

Dominique Maire, a Eurotunnel spokesman in Paris, said: "No capital [increase] or other financial operation is being considered with the banks." A spokesman in London said the company knew no reason for the fall in the shares. "They go up, they go down," he said.

Recent rumours in Paris have suggested that Eurotunnel was considering a share issue for the banks priced at Fr6.50 a share.

Fears about a financial crisis have been growing since the company issued revenue figures earlier this month that were far below expectations.

Sales for the first half of the year reached just pounds 104.5m. These followed analysts' reports of a looming cash crisis and a strike at Eurostar.

Earlier forecasts had suggested the company might achieve sales of pounds 500m for 1995. At the time, City analysts said the poor figures made a re-structuring of the company's pounds 8bn debt virtually inevitable.

The markets have been getting twitchy ahead of next month's meeting of 225 banks which are due to discuss the possibility of advancing fresh funds to the company to keep it afloat.

Though Eurotunnel is covering its operating costs it is not making any dent in the pounds 2m of interest costs that are racking up every day. This compares with the pounds 600,000 of daily revenue that is coming in.

The Channel tunnel has taken market share from the ferry companies, though they have responded with lower costs. The company desperately needs to report improved figures for July and August to strengthen its negotiating position with the banks.

The summer months are crucial to Eurotunnel, which has been battling against the ferry companies but plagued by strikes and embarrassing break- downs.

The company claims it has been taking more truck traffic than P&O on the popular Dover-Calais route and it is hopeful that it will be able to increase tolls.

However, some experts suggest that even if the banks do release more funds, Eurotunnel will exhaust its facilities by next year and require a substantial restructure.

Some analysts have been suggesting a pounds 3bn debt-for-equity swap. A report issued by a debt trader, Gary Klesch, earlier this month said that a full- scale refinancing was likely

"The pressure will be on Eurotunnel from its bankers from the third week of September by the time the August traffic figures are known," Mr Klesch said. Eurotunnel itself has described this summer as "make or break."

Michael Meacher, Labour's transport spokesman, has called for the Government to intervene. "The Channel tunnel is a crucial part of the public transport infrastructure of the country and timidity about resolving growing problems merely threatens its future."

The shares peaked at 867p in June 1989 and are now at their all-time low.