Underwriters watch Eurotunnel shares edge toward danger level

THE UNDERWRITERS of Eurotunnel's pounds 858m rights issue were on tenterhooks last night as the company's share price slid further - moving closer to the issue price of 265p. The weakness of the New York market raised more questions about what will happen before the issue closes this afternoon, writes Peter Rodgers.

The shares closed a further 7p down at 276p, only 11p above the price at which the underwriters would be forced to pick up the bill.

But underwriters in Paris took comfort from heavy trading in the nil-paid rights over the past two days, which they said was a good indication that there were investors with faith in the issue.

A total of 29 million rights was sold in the French market yesterday, although the price was little more than half the 50 centimes at which they had closed on Monday. The rights continue trading today, although their equivalent in London ceased on Monday.

More than 100 million rights have been sold in Paris since the issue was launched, according to Jean-Michel Plou, a director of Banque Indosuez, Eurotunnel's French advisers.

He said it was unlikely the investors were buying to sell again today, so close to the end of the issue, and the large amount of trading was evidence of interest in subscribing. He did not know who the buyers were.

The fact that shares were still at a premium to the subscription price was also a good sign, he said.

Paris has long been regarded as the key to the success or failure of the issue because French private investors have more than 40 per cent of the equity. But the full count on the French side will not be announced until 7 July.

If the price were to slump below 265p today, big underwriters such as Swiss Bank Corporation - which is thought to have kept at least pounds 150m of the pounds 270m it underwrote on its own books - would be heavily exposed.

Meanwhile, Eurotunnel's chief executive, Georges-Christian Chazot, spent pounds 28,500 on 10,000 Eurotunnel units at 285p per unit, and the company made a public announcement to encourage others. Mr Chazot now has 10,001 units.

(Photograph omitted)