Call me old-fashioned, but to lose nearly 1bn in a year is not good news. It is a brave man who will face the market and say: “Actually, at an operating level, these figures are encouraging.”
But Sir Alastair Morton, co-chairman of Eurotunnel, is nothing if not a fighter and he was in fighting form on Monday morning, drawing attention to the fact that revenues from the Channel Tunnel are looking good. And he has a point.
Car and freight passenger volumes on the Le Shuttle service have been rising in the first quarter and the tunnel now accounts for more than two-fifths of all Dover-Calais traffic. When Sir Alastair talks of hitting the ferry operators where it hurts, we know what he means and cross our legs in sympathy.
Furthermore, the award of the contract in February to London & Continental Railways (L&CR), a consortium that includes aspirant transport magnate Richard Branson, to build the belated high-speed link to the tunnel and run the Eurostar service can only augur well for revenues.
The sort of marketing muscle that Virgin Group is used to supplying is something to which Eurostar and Eurotunnel can look forward with optimism.
There are also less creditable comforts, when you see what amount to record-breaking company losses. The old adage goes that if I owe my bank 100, then I have a problem. If I owe the bank 1m, then the bank has a problem. How much more is it the banks’ problem, rather than Eurotunnel’s, if it is owed 8bn.
There were heavy hints on Monday that Eurotunnel’s debt mountain may never be repaid. That, quite simply, revenues will never be sufficient to cover interest payments on the level of loan capital that has been reached. The 223 banks involved are, consequently, not so much facing rescheduling as provisions against bad debt.
It is said many of the banks have already taken considerable provisions against their Eurotunnel debt, some of the order of 30 per cent. In other instances, the debt has been passed on at similar discounts to the initial exposure. The interest-repayment truce with the banks lasts until next March, when the impasse must be broken. This means a hefty debt-for-equity swap that will hugely dilute Eurotunnel holdings.
In any event, Sir Alastair appears to take the view that this is the banks’ problem, that they must produce some kind of consensus on a financial restructuring before negotiations can start.
In one sense, this is like a peace process. We have had the talks about talks. It is now up to one party – the banks – to come up with a framework that will bring all parties to the negotiating table.
I will not develop the peace-process analogy too far, because it might be distasteful. But I would say that, just as politicians talk of peace talks having to succeed in the national interest, so too should we speak of Eurotunnel having to succeed in the national interest.
It is far too important to European transport infrastructure and for our trading relations with continental Europe for the tunnel to collapse under the burden of its debt. And, of course, it won’t. It is built, it is demonstrably operational and it is established already as a familiar constituent of the transport framework. It is inconceivable that it would close through the intransigence of banks.
So, do I mean that a government – this Conservative one, a future Labour one or, heaven forfend, a French one – will step in to bail out Eurotunnel’s indebtedness? I don’t know. But I do know that Eurotunnel’s debt burden is a sad indictment of a public policy born of the Eighties that dictated the public purse would never be used for transport projects.
That policy, to be fair, has been rescinded. I do not believe the figure of 5.7bn that is banded about – it includes some highly colourful prices for undeveloped property and lease-back arrangements – but it is true that the Government has handed out billions in state assets to L&CR.
One can understand Sir Alastair’s frustrations over the years with the lethargic approach to the construction of a high-speed link to the tunnel. As it is, we have an operationally sound fixed link that is the pride of Europe, that is nevertheless hopelessly burdened with debt and under-supplied with transport infrastructure on the British side.
I am not saying that the state should entirely fund transport projects. But nor entirely should the private sector – a lesson that belatedly seems to have been learned in the treatment of L&CR.
Financial participation by both the private and public sectors must be the way forward for transport projects of national interest. They are simply too important to the way we all do business to be left to a scrap with a consortium of banks over whether the project’s shareholders, or the banks’ customers, should ultimately pick up the tab.