Leaking Eurotunnel gains freight license
PARIS, Feb 13 (AFP) - The fate of Eurotunnel, the debt-ridden private Channel tunnel operator, remained dim Friday, though a glimmer of hope came as France gave it the first foreign licence to carry freight under EU open-market regulations.
That good news was offset however, by Merrill Lynch’s downgrade of Eurotunnel shares owing to growing debt service problems the company must resolve by 2007.
The unprecedented freight license “allows (Eurotunnel subsidiary) Europorte 2 to provide international freight transport services on French rail lines belonging to the trans-European rail freight network,” the transport ministry said.
Verification of Eurotunnel’s financial situation had preceeded the decision, it added.
Europorte 2 is “the first business authorised to transport freight within the framework of European regulations transposed by the government into French law in 2003”, the ministry stressed.
Eurotunnel expressed satisfaction over the decision and said the first line it plans to operate on runs from the English end of the tunnel to Basel, Switzerland.
Eurotunnel shares initially fell sharply on Merrill Lynch’s warning that the company might be unable to service its debt in 2007, however.
The stock then recovered in midday Paris trade to show a gain 2.04 percent at EUR 0.5, while the CAC 40 index of leading shares was essentially unchanged.
On Monday, Eurotunnel announced a 2003 loss of almost EUR 1.9 billion (USD 2.4 billion) and a strategy based on lower fees in exchange for refinancing of its EUR 9 billion in debt and the launch of freight services.
Merrill Lynch nonetheless said Friday: “We view Eurotunnel’s existing capital structure as unsustainable and the company will default on its debt service requirements in 2007, unless it finds at least GBP 56 million (EUR 83 million, USD 106 million) of additional operating cashflow.”
“Due to disappointing Shuttle volumes and yields we are lowering our 2004 EBITDA (core earnings) estimate by 14 million pounds,” the broker added.
“At the same time we are increasing our 2004 net interest charge by 28 million pounds reflecting Eurotunnel’s hedging and higher interest rates.”
Eurotunnel comment focused on the government’s freight license, with spokeswoman Mady Chabrier saying it represented “marked support, which is welcome”.
Operations would begin once its Europorte 2 subsidiary obtained relevent security certificates and “furrows”, or reservations to use a specific itinerary at specific times.
France officially opened its rail network to competition on March 15, but this is the first time a rival to the state-owned SNCF rail company has obtained a license.
Rail4Chem, a subsidiary of the German chemical group BASF has obtained a German license and submitted a request for security certificates to the French transport ministry for an unspecified route.
Eurotunnel said that combined with the construction of a new terminal in Folkestone, southern England, the new license would allow for a doubling of its rail freight operations.
Subject: France news