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Thursday, January 29, 1998 Published at 15:34 GMT

UK: Politics

Bank deal helps Eurotunnel
image: [ 186 mph in France and Belgium, rather slower in England ]
186 mph in France and Belgium, rather slower in England

Eurotunnel's future has been put on a firmer footing after it said on Friday its bankers had signed a £9bn financial restructuring agreement.

The plan was put forward in November as the Channel Tunnel operator looked to free itself of the debt mountain left by extra costs associated with the biggest construction project of its kind in the world.

Under the terms of the plan, the 175 banks have agreed to swap £2bn of debts for a stake in the company, as well as reducing the cost of the loans. Eurotunnel expects the financial restructuring to be completed in April.

Agreement with the banks follows December's decision by the British and French governments to extend the life of the company's concession to operate the tunnel, from 2052 to 2086.

Eurotunnel executive chairman Patrick Ponsolle said: "I am delighted that the approval of shareholders in July 1997 has now been followed by signature of the restructuring documentation by the syndicate banks."

The agreement follows a week of crisis for Eurostar's parent company, London and Continental Railways.

John Prescott says he has no more money to give the project (1' 40")
The Deputy Prime Minister John Prescott rejected a request for more taxpayers' money from LCR which is supposed to build the link.

LCR says it needs £1.2bn to make up a shortfall in funding from the private sector. The project already has a commitment of £1.8bn of public funding, agreed by the previous Conservative administration, out of a total projected bill of £5bn.

[ image: Hi-tech train, low-tech line]
Hi-tech train, low-tech line
The link between St Pancras and Folkestone via Stratford in east London would allow the Eurostar trains to run at, or near, their 186mph top speed, and cut journey times from London to Paris and Brussels by 35 minutes.

Thousands of soccer fans are expected to use the service to watch World Cup matches in France this summer.

"Our message to football fans and other passengers is that we are very much in business," said a Eurostar spokesperson.

[ image: Passenger levels have not reached the level anticipated by Eurostar]
Passenger levels have not reached the level anticipated by Eurostar
The funding crisis has been blamed firmly by rail unions on the "incompetence" of the previous Conservative Government.

Jimmy Knapp, the General Secretary of the RMT union, said: "Years ago, the Tory Government rejected a plan for a link costing $1.9bn and which would cost the Government about half of that."

"While the Tories dithered ... our neighbours in France and Belgium got on with the real job of improving their transport infrastructure."

Nationalisation looming?

In a statement to a packed House of Commons on Wednesday night, John Prescott told MP's he has given LCR 30 days to find a source for the money it needs. If that fails the business will be taken into the public sector.

Former British Rail Chairman, Sir Bob Reid (18")
Railtrack is standing by to rescue the $5bn link: "We are examining the business case for becoming involved," said a spokesperson for the company, which runs the track, stations and signalling on Britain's railways.

She added, "Our board has been looking at the figures. We have to do what is best for our business and our shareholders."

John Noulton, Executive Director of Eurotunnel, speaks to the Today programme (1' 12")
Eurotunnel is frustrated about the latest delay in the building of the high speed rail link: "The thing that really seems to be ridiculous is here we are, 12 years after the Channel Tunnel was given the go-ahead ... we still can't seem to get a clear timescale for the provision of this link," said John Noulton, the company's executive director.

"The Belgians have done theirs, the French have done theirs, long ago. It is greeted by my French colleagues with complete incomprehension," he continued.

[ image: Drivers have to keep to less than 70mph in England]
Drivers have to keep to less than 70mph in England
If the high-speed link does get built, London-Brussels journey times would fall to two hours, with London-Paris taking about two hours 20 minutes. It would also allow Eurostar services to connect to other parts of Britain.

France completed their high-speed link in 1993, and Belgium has just completed theirs.

Professor Stephen Glaister of the London School of Economics has advice for Mr Prescott (32)
Mr Prescott's hard-line position surprised some rail industry experts: "He's taken a tough stance," said Roger Ford, the editor of Rail Privatisation News

"The message this sends out to the privatised rail companies is that they can expect no favours if they run into difficulties or want extensions of their franchises," he continued.


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  Relevant Stories

29 Jan 98 | UK
Prescott rejects £1.2bn Chunnel link rescue

26 Nov 97 | World
Banks approve Eurotunnel restructuring

26 Nov 97 | Business
Light at the end of the tunnel?

18 Nov 97 | UK
Chunnel trains 'safer than ever' - Eurotunnel

  Internet Links


John Prescott's statement to the House of Commons

The Department of the Enviroment, Transport and the Regions

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