Eurotunnel - A warning

A snowHead

There is much talk this morning in the freight press about the perilous state of Eurotunnel's finances. I also watched The Money Programme earlier this week which had a programme devoted to the same topic.

Unless they can get creditors to write off £6.4 Billion, yes Billion, of debt then it looks like curtains. I know that there are good deals out there at the moment but it would make sense if people were to consider the situation when booking.

Eurotunnel' debt are something like 10 X its annual turnover Shocked

. Considering thisfact i canoot see it survivng in its current format.

A snowHead

Was this in the IFW? RT? Lloyds?

Still, given its exclusive position in the marketplace, even in administration it would surely carry on functioning.

Well, the person's real but it's just a made up name, see?

PG, Commercial Motor, Motor Transport etc etc Laughing

. Do you think that the French and UK governments will take it over in a partnership. Laughing

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If they were to write off the debt completely and effectively 'give' the whole operation to a new organisation, what would be the difference in ticket prices?
Presumably a large chunk of the current ticket is to service the debt.

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Surely somebody would continue to operate the tunnel even if Eurotunnel were to collapse under its mountain of debt. Who would benefit if they stopped operations? Certainly not the banks who lent the money in the first place.

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Frosty the Snowman, Laughing

. Anyone see Question Time last night? I thought Marc(?) of Le Monde actually went down rather well in a typically sceptical British forum. Managed to hold his own with a good mix of Gallic humour and some interesting points that wouldn't otherwise have been raised by a British panel/audience. FenlandSkier, can just imagine the panic among the ferry companies!

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Can't see it ceasing to function permanently. With such a prime asset someone would take it over:- if there were people out there who bought MG Rover then there must be someone to buy Eurotunnel.

The quicker it goes belly-up and the debt gets written off the better: I never use it for skiing coz the fares are so ridiculously high. If they lowered their fares they could pack the punters in.

After all it is free

As I understand it even if Eurotunnel went broke the contracts in place would continue to be honoured. So Eurostar, The Shuttle and the rail freight operators would continue, but ownership of the tunnel would be held by the major creditors, mostly International Banks. The shareholders would get nothing which appears to be precisely what their shares are worth. As about 94% of the shares are held in Europe, mainly France by small investors we can expect some fireworks at the meeting. Turkeys voting for Christmas and paying for the privilege just about sums it up.

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Something on it here:
http://business.timesonline.co.uk/article/0,,9077-1658320,00.html
http://news.ft.com/cms/s/e347cfbe-decd-11d9-92cd-00000e2511c8.html (FT subscribers only)

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Debts are now apparently £6.6 Billion, with last years losses after tax of £470 Million, it's completely mad, there is no way that those debts can ever be paid by the opperating revenue generated by the tunnel, sooner or later some sort of deal will have to be done, the group itself is only valued at arround £425 Million.

Either the banks or the Government are going to have to brooker a deal, but there's no way that tunnel opperations will be stopped in much the same way as the rail network carried on opperating after the fiasco with railtrack

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I have read that operationall it is profitable...it is the debt that is just toooo big.
If they face up to the inevitable and give the company to the banks (shares are worth nothing) then the banks will have to face the same facts and write off their loans.
the banks will have already reserved for this.

Sometimes it is better just to get on with it and do it!

You know it makes sense.

How long before we get blockades by disgruntled French shareholders demanding a French government buyout. I forsee trouble at mill.

Otherwise you'll just go on seeing the one name:

Problem is that the Tunnel was built at the request of the two Governments but by private industry, the issue is that neither government wants to set a precedent by doing anything as it will cause problems for all sorts of future enterprises, I'm thinking here of things like public private partnerships to build hospitals and the like.

A snowHead

I remember discussing this with a friend who was chairman of a large merchant bank at the time that the tunnel was built. His advice was that the tunnel would likely end up as an excellent money spinner for whoever ended up owning it, but that the costs and the debt was just too high to make it a viable business proposition. He expected it to go bust at least a couple of times before the debt was written off.

A snowHead

The main banks have been quietly pulling out, for some time. It is now mostly owned by pension funds and insurance companies rolling eyes

Well, the person's real but it's just a made up name, see?

PG, great. My pension will probably be worth even less than I think.

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PG, Oooh goodie. I will loose even more on my endowment Twisted Evil

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I'm waiting for a post from laundryman telling us how it's all for the best! [ducks wink

]

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I think they should Fill it back in Very Happy

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After all it is free

I agree with rob@rar.org.uk . There have been some good deals - especially if one is prepared to travel at less popular times. Even though I live 10 minutes from the Portsmouth ferry terminal, some of the ferry prices on the long channel routes are so ridiculous it is worth the tedious drive to Dover, especially as the route down to the Alps from Calais is quieter and doesn't involve Paris. I don't understand the ins and outs of the financing deals, but the infrastructure asset exists, and must continue to operate in the longer term. The key question of who benefits, and who suffers, won't affect that.

Whilst on the subject of crossings, does anyone know what is going to happen on the western channel once P & O stops. Will it become even more expensive to travel with Brittany Ferries?

davidof, You should be slightly safer on the Eurostar than going by car, however in all honesty the French and British Governments cannot afford to allow the tunnel to be shut, if only for loss of face on the world stage, they will in the end sort things out, it just depends on the creditors, Eurotunnel and the Governments, so come back in 10 years when they work it all out Mad

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pam w, I have a friend with a house in Britanny, who's going to propose to Brittany Ferries that they offer a special "owners" deal like Eurotunnel used to. You could also write, and maybe, if enough people did .....

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davidof, I think that the travel contract is with Eurostar which is independant of Eurotunnel, just a customer. It is Eurotunnel which is going bust. Eurostar should continue to honour tickets as it will merely have a new deal with the receivers or the new owners.

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davidof, john wells has outlined exactly who the contract exists with. Eurotunnel own the infrastructure they do not provide services to travellers.

You know it makes sense.

Another thing to note is as with any company who you are afraid may go out of business pay by credit card and you should be protected.

Otherwise you'll just go on seeing the one name:

T Bar, whilst you are theoretically correct it does not always work, I think credit card companies may have a get out clause if you place an order with a company who have puplicly stated that they are in financial difficulty. Much like innsurance companies and pre existing medical conditions

davidof, yes we were talking about Eurotunnel, I just thought I'd mention the Eurostar aspect of things. I believe you are right in that Eurotunnel are the ones providing the car carrying service

A snowHead

PG,

I think I'm in agreement with the majority view for once! I'm glad it's there, just give it to the banks holding the debt and let them get on with it!

A snowHead

I've been wondering about the validity of tickets bought in advance if the company goes bust. I imagine they will be invalid.

If I recall correctly, credit card companies are responsible for refunds in these circumstances on purchases over £100. On that basis, £98 tickets might not be such a good buy - it might be worth booking on a crossing that puts the price just over the £100 mark.

Someone correct me if I'm wrong about this, please!

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Alastair, I can't imagine the governments would permit a deal that would allow any new owner to do that, and I reckon the negative publicity would be counter-productive for them anyway.

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Have had a good look and cant see anywhere that says Eurotunnel are bonded to guarentee your money.

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davidof, The car carrying service is provided by the Shuttle, passenger services are provided by Eurostar and freight is carried by English and scottish Railways, exactly as I set out in my earlier post.

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David@traxvax, wrong I'm afraid, this from Eurotunnels own web site:

Eurotunnel manages the infrastructure of the Channel Tunnel and operates accompanied truck shuttle and passenger shuttle (car and coach) services between Folkestone, UK and Coquelles, France. Eurotunnel also earns toll revenue from other train operators (Eurostar for rail passengers, and EWS and SNCF for rail freight) which use the Tunnel. Eurotunnel is quoted in London, Paris and Brussels Stock Exchanges.

As I read this should Eurotunnel fail then there will be problems with vehicle transport but it only might have an effect on freight and passenger transit by rail

Interestingly this bit of info caught my eye

Eurotunnel’s operating revenue in 2004 was £538 million. Transport activities account for 96% of revenue, from Eurotunnel’s own shuttle services (53%) and from the railways (43%). The remaining 4% of revenue is derived from non-transport activities including retail, telecoms and property development.

Now where it gets interesting is in the accounts pages, of that £538 million revenue approximatelly £171 million was opperating profit after expenses, unfortunately they had to pay arround £331 million in interest and bank charges or roughly double their profit, oh and £23 million to the tax man

After all it is free

D G Orf, interesting figures - why are they paying money to the taxman when they are making a trading loss and there are no capital repayments? Nonallowable expenses, depreciation not balanced by capital allowances or capital repayments to someone seem the obvious options. The operation might be more viable than the bottom line figures suggest.

Unless they get their act together there is the risk that low confidence in their survival will reduce the turnover anyway and bring forward the crisis.

john wells, I think it might be a French Tax rather than a British one, there is some mention of it in the accounts but as with all corporate accounts in multiple languages it's not the easiest thing to decipher

Anyway they have until the middle of October (I think it's the 15th) to sort things out or they go Bankrupt, that's the official line by the way, at that point whatever deal they have on paying the interest runs out Shocked

Certainly without the repayments the opperation would be arround £150 million in profit per year, which would indicate that if they could write off the crippling debt (by going bankrupt ?) it would be worth while

According to their own figures the Assets of Eurotunnel are only worth arround £3.5 Billion, including a value of over £2 Billion for the tunnel itself, their Debt is over £6 Billion and once their deal on interest payments ends in October they won't even be able to make the payments on their debt. My guess is that at that point they will go bust and the French and British Governments will offer the creditiors about 30p in the pound on their debt or less, all the shares will become worthless (As per Railtrack) and the governments will aquire a nice little earner

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Eurotunnel - A warning

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