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|tiraider: Page last updated at 08:27 GMT, Tuesday, 29 April 2008 09:27 UK
Eurotunnel in 915m euro cash call
Eurotunnel has slashed its debt
Channel Tunnel operator Eurotunnel plans to raise 915m euros (£718m) from shareholders to help the indebted firm to pay off creditors.
Existing investors will be offered Eurotunnel shares at 8.75 euros - a discount of 28% to the company's share price on Friday.
Eurotunnel was hamstrung by high debt levels for many years, but carried out a complex restructuring in 2007.
As a result, its debts were more than halved to about 4bn euros.
Eurotunnel said the money raised from the rights issue would allow the firm to make further savings on its financial charges.
"This rights issue will enable Groupe Eurotunnel to control its future as a long-term infrastructure concessionaire with good prospects in terms of profitability and recurrent cash flow," Eurotunnel Chairman Jacques Gounon said.
Boosted by the debt restructuring, the firm reported its first profit last year when it made 1m euros ($1.6m; £795,000).
The firm said the result showed that it had "broken" with its troubled financial past.
|haveagoodday: Eurotunnel turns to rights issue with a twist
By Alistair Osborne
Last Updated: 11:52pm BST 19/04/2008
Eurotunnel will brave the credit crisis early next month to launch a deeply discounted 900m (£710m) rights issue, featuring an innovative incentive for existing shareholders.
Jacques Gounon, chairman and chief executive of the Channel Tunnel operator, is aiming to announce the cash call in the week beginning May 5 and has vowed it will be the final piece in the company's complex financial restructuring. It follows last year's rescue refinancing which slashed debts from 9.4bn to 4.3bn.
Eurotunnel, which is being advised by investment bank Lazard, wants to raise the cash to buy back the remaining redeemable notes held by junior creditors.
The notes were put in place as part of last year's rescue. Mr Gounon wants to buy them back before they convert into new shares, so preventing any further shareholder dilution.
Eurotunnel raised 800m last month to buy back the first chunk of notes through an issue of deferred shares. Some 650m was taken up by Goldman Sachs Infrastructure Partners, which is on track to emerge with 15pc of the company.
Eurotunnel is expected to price the cash call at a discount of around 25pc to the current share price of about 12.50. Such a discount is similar to that offered for the deferred shares, which were priced at 9.65. Mr Gounon said: "The discount has not been decided but the deferred share offer gives some benchmark."
He said he planned to complete the rights issue within three weeks of the launch - just before the first interest payments of around 8m are due to the note holders.
To encourage Eurotunnel's 500,000 shareholders to subscribe, the company will offer a warrant for each new share acquired, which can be used to secure a further discount. Mr Gounon said the value of the warrant was yet to be decided, but hinted it could be around 2 per share.
In an interesting twist, shareholders who do not take up their rights will also receive the warrants. After 10 days, Eurotunnel will buy the warrants back, using the proceeds from new investors subscribing at a premium to the cash call. "That will be a final gift to the shareholders," said Mr Gounon, adding that investors who take up their rights will also receive a "loyalty premium" for holding shares for "two to three years".
"I believe we can raise around 300m from existing shareholders," said Mr Gounon, who plans to have the issue underwritten by the end of this week or early next week.
He said he was more worried the issue could be delayed by regulators approving paperwork than the credit crisis.
Strong first-quarter revenue growth, up 15pc to almost 188m, had increased funds' appetite for investing in Eurotunnel, he said.
|tiraider: Not trying to wreck your theory, but the French analysts reckoned it was worth 28 eurocents per share.
Having said that I would think they are basing their valuation on the suspended price which was a liquidation price.
Steep Drop May Lie At End Of The Eurotunnel
Vidya Ram, 07.11.07, 11:03 PM ET
LONDON - Groupe Eurotunnel has every reason to feel smug. Its latest performance figures vindicate the major restructuring that took place last year. But with the company's shares surging, they are at levels well above analyst valuations.
Shares of the operator of the tunnel connecting England to France zipped up Wednesday on the Euronext in Paris after the company announced that its revenues for the first half of the year rose 7.0% to £252 million ($512.92 million) from £236 million ($480.33 million), excluding minimum usage payments, which came to an end last November. Under the scheme the company received payments from the French and British governments, to top up the amount paid by the rail operators that used the tunnel, until rail traffic got properly off the ground.
The company reported growth in traffic through the tunnel and increases in passenger numbers on Eurostar trains.
Groupe Eurotunnel (other-otc: GREGF - news - people ) shares zoomed up 5 euro cents (7 cents), or 11.6% to 48 euro cents (66 cents) in late afternoon trading in Paris, where newly issued shares began trading on July 2. The shares were swapped for old ones following a restructuring deal that was agreed with the company's creditors, which replaced the company's £6 billion ($8.3 billion) debt with a new £2.8 billion ($3.9 billion) facility.
Its half-year results are an indication of the success of the restructuring, said Pierre Flabbee, an analyst at Kepler Equities.
He said that customers were increasingly turning to the tunnel as a means to crossing the channel, rather than the ferry or airlines. Airlines are expected to take a hit from new security measures that increase the time and inconvenience of traveling by air.
The number of travellers on the Eurostar rose by 5.0% to 3.9 million for the first half of the year. The number of trucks that used the company's shuttles rose by 9.0%, while the number of passengers travelling by car who used the tunnel rose by 8.0%.
A spokesman for Eurotunnel said that passengers were also increasingly concerned about their carbon footprint, and were consciously moving away from using short-haul flights within Europe.
The company could also benefit from a new agreement which its largest customer, Eurostar, has just signed up to. Eurostar and six other European train operators have formed an alliance to promote high-speed rail travel across Europe, and hope to make a 5.0% dent in the market for intercontinental short-haul flights in the next three years.
However the current price of Eurotunnel's shares is considerably higher than their actual worth.
Flabee values the shares at 28 euro cents (39 cents), 41.7% below its current price of 48 euro cents. He said that analysts were puzzled as to what was driving the share price.
"People may believe the company could be taken over by a company that would be interested in its tax deficits, such as a utility company," he said, stressing that this was "pure theory". Under French law, the purchaser must be in the same economic field as the company it hopes to purchase to use for its tax deficits.
Flabee said it was difficult to predict whether the company's share price would correct itself downwards, closer to its actual worth.
Eurotunnel has had troubles since it was first set up in 1986. Higher than expected construct costs for the 30-mile tunnel were not offset when it started operating in 1994, lumbering the company with a large debt burden, which threatened to bankrupt the company.|
Groupe Euro. share price data is direct from the London Stock Exchange