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Case
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Reference no. 295-001-1
Authors: Paul Stonham (ESCP Business School London)
Published in: 1995

Abstract

First of a two case series (295-001-1 and 295-002-1). In 1994, Eurotunnel, operator of the Channel Tunnel between Britain and France, announced it was launching an #858 million gross rights issue of equities to cover its cash requirements and secure its financial future. At the time, the issue was one of the largest in British corporate history and can be considered a skilful piece of financial engineering. All of its financial manoeuvres were undertaken in the face of zero revenues up to May 1994, and no dividends were expected to be paid until the year 2004. Yet Eurotunnel persuaded the financial community to invest in 324 million units (twinned shares). Part 1 of the case study concerns Eurotunnel''s strategy in raising both equity and debt in a refunding exercise in 1994 and its management and decision-making on such matters as debt/equity mix, cost of capital, interest rates and currency risk, and bank preconditions.
Location:
Size:
Total assets, liabilities GBP10 billion
Other setting(s):
1994

About

Abstract

First of a two case series (295-001-1 and 295-002-1). In 1994, Eurotunnel, operator of the Channel Tunnel between Britain and France, announced it was launching an #858 million gross rights issue of equities to cover its cash requirements and secure its financial future. At the time, the issue was one of the largest in British corporate history and can be considered a skilful piece of financial engineering. All of its financial manoeuvres were undertaken in the face of zero revenues up to May 1994, and no dividends were expected to be paid until the year 2004. Yet Eurotunnel persuaded the financial community to invest in 324 million units (twinned shares). Part 1 of the case study concerns Eurotunnel''s strategy in raising both equity and debt in a refunding exercise in 1994 and its management and decision-making on such matters as debt/equity mix, cost of capital, interest rates and currency risk, and bank preconditions.

Settings

Location:
Size:
Total assets, liabilities GBP10 billion
Other setting(s):
1994

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