'Chunnel' Operator Faces Crunch Getting Its Finances in Order

From Reuters

Eurotunnel PLC faces a crunch week in its troubled eight-year life as the English Channel tunnel operator scrambles to bring banks in line before asking long-suffering investors for a lifesaving share issue.

The market expects banks to cough up a grudging $1 billion of debt this week, with a stock rights issue of up to $1.36 billion possibly coming before the end of next.

That would take total costs of the world's biggest engineering project to nearly $16.6 billion, more than double the original budget.

Eurotunnel, though, refuses point-blank to say exactly how much it will ask shareholders to put up.

It also declined to comment on weekend news reports that banks were already considering deferring interest payments in case refinancing fails.

"It's all speculation," a Eurotunnel spokeswoman said Sunday. "We don't wish to comment on where we are at the moment. Once the debt is finalized, then we will go out to shareholders."

The group has had a frantic last two months.

In April, it shelled out $1.66 billion to settle a bitter cost dispute with Transmanche Link, builders of the 31-mile undersea tunnel.

May 6 saw the tunnel's official opening by Britain's Queen Elizabeth and French President Francois Mitterrand, and the first trucks finally rolled through last Thursday--a year late.

Saturday, the Financial Times newspaper reported that a reluctant European Investment Bank had agreed to pump in $75 million, and Germany's public sector Kreditanstalt fuer Wiederaufbau had also joined in.

Bank of England lobbying has also pulled Japanese banks--lenders of nearly a quarter of its $10.3-billion debt so far--into line.

"All the way through, the bank has been kept in touch by the company and its banks. At times, we have been able to help them reach agreement," a Bank of England spokesman said of its efforts.

Eurotunnel's money runs out in June, and it needs at least $1.66 billion to $1.81 billion to see it through to a projected cash break-even in 1998.

Add costs, extra interest and a cushion, and the market expects it to go for up to $2.42 billion.

Eurotunnel's share price slumped to $5.63 on Friday as thoughts of the cash call, far higher than expected, began to start sinking in.

Most of Eurotunnel's 633,000 shareholders are individuals expected to shun the issue, meaning underwriters are looking for a large discount--up to 30%, one Sunday newspaper said.

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