View from City Road: All gloom at the end of the tunnel

Presumably Eurotunnel does not need a government operating licence to ferry the Queen and President Mitterrand through the Channel tunnel for today's grand state opening. Presumably not, because - unless Sir Alastair Morton, joint chairman, is able to produce it like a rabbit out of a hat amid all the grandeur and razzmatazz of the inaugural celebration - it does not yet have one.

Look behind the public relations facade of all those dignatories gathered together for this historic event and you find a company in a state of deep financial crisis and operational muddle. The tunnel is built and largely ready to go but the operator is a very sick child.

Eurotunnel insists that receipt of the necessary operating licence to begin freight services - passenger services won't start until the autumn at the earliest - is expected imminently. It had better be right, for the trains are not the only things being held up by its non-appearence - the Eurotunnel rights issue to stave off bankruptcy is as well.

The cash call, scheduled for mid- May, has already been delayed until the end of the month because of the difficulty Eurotunnel has had in getting all its ducks in a row. With the company apparently struggling to produce even the working capital statement necessary for the rights prospectus, further delays are possible.

The size of the issue keeps rising, too. At first it was just pounds 500m. Then it was pounds 600m. Just recently Warburg has taken to telling prospective sub-underwriters during pre-marketing meetings in the City that the likely figure is pounds 650m. That's not enough, it now appears - pounds 700m then? Sorry boys, wrong again. In fact it's almost certain to be pounds 750m-plus, the figure so vehemently denied by Eurotunnel as wildly exaggerated when it was first aired in the press a month ago.

Negotiations with the banks are not going nearly as smoothly as might be expected. In addition to the call on shareholders, Eurotunnel needs bankers to put up an equal amount.

In theory this should be an easy enough exercise since the latest tranche is being offered as 'senior debt', meaning that it ranks before any other creditor in the event of default. The problem is that in order to structure the refinancing in this way Eurotunnel needs the agreement of more than 90 per cent of its existing bankers, of whom there are a staggering 200. Not surprisingly, many are balking at the idea.

To hardened followers of Eurotunnel, the latest shenanigans are just part of an everyday tale of tunnelling folk. Since its inception it has lurched precariously from one crisis to the next. If ever there comes a time when Eurotunnel is not in crisis, that truly would be a remarkable thing.

The present difficulties are as bad as they come. There is growing anxiety among Eurotunnel's normally unflappable advisers. The rights issue will probably get away, if only because it has to - without it shareholders lose everything. By the same token, bankers will probably in the end agree the extra loans. But there is hardly anyone without a vested interest in the matter willing to call it.

A year from now Eurotunnel shares could as easily be worth nothing as their present 460p. The tunnel will survive and one day prosper. That much seems certain. Whether Eurotunnel, with its mountain of debt, does as well is a different matter.