Eurotunnel PLC

In early April of this year, the operating company of the tunnel announced that it lost more than $600 million in 1994, and stated that its revenues had been so meager that it might not be able to meet its huge debt payments for debt service in 1995. The British-French consortium presently has debts of $12.9 billion and interest payments of more than $1 billion per year, making it the most expensive investor-financed project in financial history (New York Times, 1995).

From a financial and economic perspective, what is most fascinating about the recently completed Eurotunnel is that despite both official and unofficial projections, there is no telling precisely what it will earn, when it will earn, or even if it will survive. The discussion which follows will attempt to understand how such a situation could have occurred and whether anything could have been done to

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he 6 billion pounds available for construction, and January 9th, when its bankers agreed to release more cash, the companies involved in the project wrangled almost without a break to find a way to save it. They managed to persuade the banks that it was worth risking more money... (Economist, Jan. 13, 1990, p. 23) In the early 1990s, in addition to the financial problems of the Eurotunnel, one also began to hear about other areas of concern. Some argued that the regions to be connected by the tunnel--Kent in southeast England and Sangatte, near Calais, in northern France--were too remote to attract a financially viable share of the cross-channel market (Financial Times, April 6, 1990). However, at the same time, official Europe was bullish and it stressed the fact that the Community of European Railways had launched an ambitions program to develop a high speed network throughout Europe for which the Channel was supposedly a key component (Guardian, May 5, 1990). What has seemed to make Eurotunnel stockholders so subject to dramatic mood-swings are not only the bullish economic forecasts but also the more bearish consequences of compound interest. The more the capitalization tilted toward debt, the more precarious
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Some common words found in the essay are:
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Approximate Word count = 1874
Approximate Pages = 7 (250 words per page)