Financial management of channel tunnel Essay Example | Topics and Well Written Essays - 2000 words

Financial management of channel tunnel - Essay ExampleEurotunnel was mainly financed by margin loans from a large consortium of over 100 European and Japanese banks. Eurotunnel also raised real(a) amounts of equity in four public offerings during the construction of the Tunnel, mainly from small shareholders in France and the UK. The marketing of the shares was fling towards small shareholders.In the end, the Channel Tunnel costs about 10 billion to build (compared with sign estimates 8 years earlier of about 5 billion). Of this 10 billion, 8 billion was raised in debt from banks and 2 billion in equity. The last fund-raising exercise took place in May 1994, just 2 months before the new services were to begin, when 800 million of new equity and 700 million of debt was raised to get the experience finished and up and running. By then the banks and m both shareholders were very nervous about the costs and delays to the consider and the prospects of recouping their investment.Euro tunnel shareholders have seen their investment crumble by around 90% since the company went public in 1987. reflection costs spiralled and revenues fell short of forecasts, leaving the company struggling with debts of 9bn (6.4bn). Shareholders have never been paid a dividend. The UK political relation has already made it clear that there can be no question of any public money for Eurotunnel, and there is no change in that position. Eurotunnel shareholders are mostly French reclusive investors.But it said it could not afford to do so without help in cutting the impression of repayments on debts which it ran up during vast cost over-runs on the tunnels construction in the late 1980s and other(a) 1990s. Euro tunnel begs for rescue plan (Clark, 2004)2.2. Andrew, Clark, (2004) Guardian, retrieved from the website on 19th Feb 06. (http//www.guardian.co.uk/) Financial Management of Channel Tunnel declaim Link (CTRL)The Channel Tunnel Rail Link (CTRL) is the largest civil engineering infrastructure project before long being constructed in the UK with a budget of 5.3 billion (S$14.8 billion). The Project is split into two sections. Section 1, 70 km long from the Channel Tunnel to Fawkham Junction in North Kent is scheduled for completion and in operation(p) running of Eurostar trains by September 2003. Section 2, 39 km long, completes the Link from North Kent to St Pancras in aboriginal London and is programmed to be operational in January 2007 (Davies and Joy, 2004)2.The London & Continental Railways Limited (LCR) was awarded the contract to build the CTRL in February 1996 and to run the British arm of the Eurostar International train service (Eurostar UK). Initially, LCR proposed to fund the construction of the link from clannish finance through debt and equity raised on the back of future revenue from Eurostar, UK and from direct government grants. This overtly optimistic plan backfired and LCR abandoned its plans to raise private finance and approached th e Department foradditional grants in return for a share of future profits. After reviewing the options, the department of transport decided to restructure the live deal with LCR. In 1998, the government set out the principles of a negotiated restructuring which enhanced public