Eurotunnel hopeful despite net annual loss of £925m

THE Anglo French Channel Tunnel operator Eurotunnel yesterday reported a 1995 net loss of £925 million sterling but said debt restructuring talks were making progress and the tunnel had made an encouraging start to 1996.

The debt laden company, which needs success in talks with its 226 creditor banks to secure its future, said the loss was after financial charges of £768 million. About £118 million represented bank interest unpaid since last September when Eurotunnel suspended some interest payments.

The British co chairman, Sir Alastair Morton, said the company had made "quite a significant operating profit", excluding depreciation and one off charges.

He echoed the optimism of the company's statement which said that, in its first year of operations, its Le Shuttle car and freight service had achieved market leadership on the short sea crossing between Britain and France.

The tunnel operator, which has been battling against ferry operators since it began transporting freight in May 1994 and passengers in December that year, aimed to strengthen its position in 1996, the company said.

Eurotunnel's efforts to improve operating cash flow would have to overcome a sharp fall in prices, what it called a "lack of commercial drive" from railway companies, and relatively high initial operating costs.

In Paris, the finance director, Mr William MacKenzie, said the company expected to have enough surplus cashflow this year to allow it to repay some interest on its junior debt in the second quarter of 1996.

The French co chairman, Mr Patrick Ponselle, said the company had an encouraging operating start to the year, with first quarter turnover up 140 per cent.

"We have had an encouraging but difficult start to 1996. It leaves us reasonably optimistic for 1996," he told reporters.

Sir Alastair said that Eurotunnel had made clear to its banks, however, that its debts are so large it may never be able to make enough money to pay back the principal plus interest at the contracted rate of current loans. "We're negotiating for lower interest rates and we're negotiating, necessarily, for later payment, he said. "But there's 57 years of this concession left and there is only the cashflow in this project. So the banks and the company, on behalf of the shareholders, are basically talking about who gets which share of that, in which order, over time."

Sir Alastair said that he hoped investors, whose shares in Eurotunnel have plunged in value in recent years, would stick with the board to the end of the talks.