View from City Road: Eurotunnel needs plenty of luck

What on earth is going on at Eurotunnel? At a shareholders' meeting to approve an increase in capital yesterday, Eurotunnel's joint chairman, Sir Alastair Morton, poured cold water on reports that the size of its planned rescue rights issue had been increased to a minimum of pounds 800m. Sacre bleu, screamed his advisers. We can't go along with that because if anything the figure is going to be a lot higher. It might end up as much as pounds 900m. By the afternoon there were reports that Sir Alastair had been 'misquoted' (someone had surely got at him). Though he refused to confirm that upwards of pounds 800m was required, he agreed that simple arithmetic made it look at least possible. Confused? You soon will be. Sir Alastair says the money doesn't have to be in until June 20. Others say the end of May, when existing banking facilities run out. Just who's running the show - Sir Alastair or the advisers - and who's right about how much is needed?

The truth of the matter is that Eurotunnel requires pounds 1.65bn of extra finance to see it through the first year; around pounds 650m will be provided by the banks and the rest must come from shareholders. If the money isn't committed by the end of May there is going to have to be a full-scale debt restructuring. Though it tries to pretend otherwise, Eurotunnel is perilously close to the edge. As it is, a rights issue of pounds 900m is going to have to be deeply discounted to get away at all. If the share price keeps slipping in the way it has been, there comes a point where the exercise becomes impossible. Eurotunnel is a remarkable surviver but it really will need all its nine lives to come through this one.