IHT: Major loss at Eurotunnel brings plea for state aid
Feb 13th 2004, 12:27 am
#1
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IHT: Major loss at Eurotunnel brings plea for state aid
Major loss at Eurotunnel brings plea for state aid
Conrad de Aenlle IHT
Tuesday, February 10, 2004
Â
LONDON Groaning under an ocean of debt, Eurotunnel, the operator of the tunnel
under the English Channel, warned on Monday that it may face bankruptcy after
2006 unless its creditors agree to another major debt restructuring to help
shore up its balance sheet.
Eurotunnel has £6.4 billion, or $12 billion, in debt and interest charges debt
left over from its costly construction and delayed opening. On Monday, the
company said it had a net loss of £1.33 billion last year, as passenger and
freight traffic failed to pick up from the year before and interest costs on
the heavily indebted business rose. The British-French company had a net profit
of £302 million in 2002.
The announcement of the record loss drove the stock as much as 14 percent lower
before it finished 4 pence lower at 34.75 pence in London.
The company's dire circumstances could lower the cost of moving people and
freight between Britain and France, analysts noted.
Speaking at a news conference in Paris, Richard Shirrefs, chief executive of
Eurotunnel, said the company might issue new shares or bonds backed by future
revenue to try to reduce its debt load. It will ask creditors to stretch
repayments to provide breathing space and allow it to cut rates, he said.
Eurotunnel's precarious position is highlighted by the fact that it is
borrowing against a credit line in order to meet interest payments.
Shirrefs said Eurotunnel might face bankruptcy within two years: that is when
guaranteed fees for traffic through the tunnel expire. The fees were based on
assumptions for passenger and fright traffic that have proved far too generous.
Last year, 6.3 million passengers traveled through the tunnel, against the 10
million that were projected.
Eurotunnel sought to drum up support from the British and French governments in
the form of pressure on state and private rail companies that bring passengers
and freight to and through the tunnel. The debt restructuring would be the
company's third.
The warning that it may declare bankruptcy unless it received the government
assistance seemed unlikely to move the authorities on either side of the
Channel, analysts said.
Indeed, both governments distanced themselves from the company on Monday and
said it would have to find a solution on its own.
"Whatever proposals may finally emerge, the government has made it clear that
it will not put any public money into Eurotunnel," a spokesman for Britain's
Department for Transport told Reuters. "Indeed this is prohibited by
international treaty and legislation."
Jason James, a global equity strategist at HSBC in London, said he doubted that
either government had the ability or the inclination to help.
"It might work on the French side in the sense that the French government has
tended to be more helpful" to operators of large, quasi-state projects, he
said. "But I don't know if the French government will want to stick its neck
out for Eurotunnel in this way."
Even if it did, it would be difficult to do so under European Union law.
The more laissez-faire attitude in Britain would make the authorities there
even less likely to lend a hand, he said. And they have no reason to, he
pointed out, for while Eurotunnel's future is uncertain, that of the tunnel
itself is not.
"One thing I can say is that the tunnel has been dug - and it's going to stay
there whether Eurotunnel has financial troubles or not," James said. "It's not
likely to disappear, and the competitive pressures it imposes will not be
removed."
James said the most likely scenario was that if Eurotunnel is desperate for
cash, it will cut charges. That would put new pressure on the ferries and other
companies competing on the same route.
"It's one of those situations where if you confess you're struggling it puts
you at a disadvantage," he said.
http://www.iht.com/articles/128775.html
Conrad de Aenlle IHT
Tuesday, February 10, 2004
Â
LONDON Groaning under an ocean of debt, Eurotunnel, the operator of the tunnel
under the English Channel, warned on Monday that it may face bankruptcy after
2006 unless its creditors agree to another major debt restructuring to help
shore up its balance sheet.
Eurotunnel has £6.4 billion, or $12 billion, in debt and interest charges debt
left over from its costly construction and delayed opening. On Monday, the
company said it had a net loss of £1.33 billion last year, as passenger and
freight traffic failed to pick up from the year before and interest costs on
the heavily indebted business rose. The British-French company had a net profit
of £302 million in 2002.
The announcement of the record loss drove the stock as much as 14 percent lower
before it finished 4 pence lower at 34.75 pence in London.
The company's dire circumstances could lower the cost of moving people and
freight between Britain and France, analysts noted.
Speaking at a news conference in Paris, Richard Shirrefs, chief executive of
Eurotunnel, said the company might issue new shares or bonds backed by future
revenue to try to reduce its debt load. It will ask creditors to stretch
repayments to provide breathing space and allow it to cut rates, he said.
Eurotunnel's precarious position is highlighted by the fact that it is
borrowing against a credit line in order to meet interest payments.
Shirrefs said Eurotunnel might face bankruptcy within two years: that is when
guaranteed fees for traffic through the tunnel expire. The fees were based on
assumptions for passenger and fright traffic that have proved far too generous.
Last year, 6.3 million passengers traveled through the tunnel, against the 10
million that were projected.
Eurotunnel sought to drum up support from the British and French governments in
the form of pressure on state and private rail companies that bring passengers
and freight to and through the tunnel. The debt restructuring would be the
company's third.
The warning that it may declare bankruptcy unless it received the government
assistance seemed unlikely to move the authorities on either side of the
Channel, analysts said.
Indeed, both governments distanced themselves from the company on Monday and
said it would have to find a solution on its own.
"Whatever proposals may finally emerge, the government has made it clear that
it will not put any public money into Eurotunnel," a spokesman for Britain's
Department for Transport told Reuters. "Indeed this is prohibited by
international treaty and legislation."
Jason James, a global equity strategist at HSBC in London, said he doubted that
either government had the ability or the inclination to help.
"It might work on the French side in the sense that the French government has
tended to be more helpful" to operators of large, quasi-state projects, he
said. "But I don't know if the French government will want to stick its neck
out for Eurotunnel in this way."
Even if it did, it would be difficult to do so under European Union law.
The more laissez-faire attitude in Britain would make the authorities there
even less likely to lend a hand, he said. And they have no reason to, he
pointed out, for while Eurotunnel's future is uncertain, that of the tunnel
itself is not.
"One thing I can say is that the tunnel has been dug - and it's going to stay
there whether Eurotunnel has financial troubles or not," James said. "It's not
likely to disappear, and the competitive pressures it imposes will not be
removed."
James said the most likely scenario was that if Eurotunnel is desperate for
cash, it will cut charges. That would put new pressure on the ferries and other
companies competing on the same route.
"It's one of those situations where if you confess you're struggling it puts
you at a disadvantage," he said.
http://www.iht.com/articles/128775.html
Feb 13th 2004, 9:57 am
#2
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Re: Major loss at Eurotunnel brings plea for state aid
"Baycobi" <[email protected]> wrote in message news:[email protected]...
> Major loss at Eurotunnel brings plea for state aid
> Conrad de Aenlle IHT
> Tuesday, February 10, 2004
>
> James said the most likely scenario was that if Eurotunnel is desperate for
> cash, it will cut charges.
This is unlikely to result in a net increase in revenue.
The market is just not as big as it was expected to be.
ET (and ES) take a sizable portion of the available traffic
- in excess of 50% in most categories, so a reduction of
fares by 50% would be commercial suicide unless new
traffic was created. But outside of the peak holiday season
there just isn't enough reason why somebody who isn't
already making a short journey across the channel will start
to do so because the fares are cheaper and for longer journeys
the inconvenience factor means that people are still going to
prefer flying.
Decreasing by 10% would be a pointless exercise, the ferries
would just match it and you'd be back where you started.
There is the possibility of creating extra demand by running
through trains to longer destinations (Amsterdam, Cologne,
through freight) but regulatory issues are a much bigger
concern for pax services than the 'required' fare would be
and the attitude of French rail unions are hampering the
freight expansion.
AIH ET do have some figures which would prove this point
one way or the other. This last Autumn ET did not reduce
their fares from the summer peak prices and did not compete
on price with the ferries (who did reduce to 'winter' rates).
As a customer I know that I reduced my journeys with them
because of this. As a shareholder I would be interested
in knowing if this 'trial' (my word) resulted in an overall
net increase or decrease.
> That would put new pressure on the ferries and other
> companies competing on the same route.
> "It's one of those situations where if you confess you're struggling it puts
> you at a disadvantage," he said.
There's nothing secret about the health of ET.
tim
>
>
> http://www.iht.com/articles/128775.html
> Major loss at Eurotunnel brings plea for state aid
> Conrad de Aenlle IHT
> Tuesday, February 10, 2004
>
> James said the most likely scenario was that if Eurotunnel is desperate for
> cash, it will cut charges.
This is unlikely to result in a net increase in revenue.
The market is just not as big as it was expected to be.
ET (and ES) take a sizable portion of the available traffic
- in excess of 50% in most categories, so a reduction of
fares by 50% would be commercial suicide unless new
traffic was created. But outside of the peak holiday season
there just isn't enough reason why somebody who isn't
already making a short journey across the channel will start
to do so because the fares are cheaper and for longer journeys
the inconvenience factor means that people are still going to
prefer flying.
Decreasing by 10% would be a pointless exercise, the ferries
would just match it and you'd be back where you started.
There is the possibility of creating extra demand by running
through trains to longer destinations (Amsterdam, Cologne,
through freight) but regulatory issues are a much bigger
concern for pax services than the 'required' fare would be
and the attitude of French rail unions are hampering the
freight expansion.
AIH ET do have some figures which would prove this point
one way or the other. This last Autumn ET did not reduce
their fares from the summer peak prices and did not compete
on price with the ferries (who did reduce to 'winter' rates).
As a customer I know that I reduced my journeys with them
because of this. As a shareholder I would be interested
in knowing if this 'trial' (my word) resulted in an overall
net increase or decrease.
> That would put new pressure on the ferries and other
> companies competing on the same route.
> "It's one of those situations where if you confess you're struggling it puts
> you at a disadvantage," he said.
There's nothing secret about the health of ET.
tim
>
>
> http://www.iht.com/articles/128775.html
Feb 13th 2004, 5:50 pm
#3
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Posts: n/a
Re: Major loss at Eurotunnel brings plea for state aid
On 13/2/04 22:57, in article [email protected], "tim"
<[email protected]> wrote:
> There's nothing secret about the health of ET.
A friend of mine was commercial director for one of the big British civil
engineering firms. He predicted the whole mess and was instrumental in
keeping his firm from bidding on the project.
Best commercial decision they ever made.
<[email protected]> wrote:
> There's nothing secret about the health of ET.
A friend of mine was commercial director for one of the big British civil
engineering firms. He predicted the whole mess and was instrumental in
keeping his firm from bidding on the project.
Best commercial decision they ever made.
