European Stars and Stripes (Newspaper) - May 30, 1992, Darmstadt, Hesse                                Delays dig financial Hole for eur Tunnel by Roger Cohen the new York times above 34 Miles of Stone could t Stop construction on the Quot Channel but financial problems might. Tunnelling machines these colossal pieces of equipment simultaneously dug removed Rock and put up Tunnel Walls. With a laser beam to keep the Driver on course the 700-toot-Long Caterpillar pressed curved slabs into the newly exposed Tunnel As it dug along. Travelling the Tunnel who take 35 minutes. During the trip passengers we be Able to stay m their vehicles or stroll about the shuttle trains. England the Overall length of the Tunnel is 31 Miles 24 Miles at it underwater France plagued by conflict and delays the $14.7 billion English Channel Tunnel project has degenerated from a grand Symbol of european business integration to a financial morass with one of the leading contractors suggesting this week that the project could face bankruptcy. The Quot Channel a As the 24-mile-Long underwater link Between Britain and France sometimes is called was once scheduled to open on june 15 next year. That has been postponed to the last Quarter of 1993 of the earliest and May Well be put off until 1994 because of financial disagreements and construction delays. A bitter dispute with contractors Over payments and a breach of the loan agreement with the Banks that have committed $12.3 billion to the venture have undermined eur Tunnel the British and French company that will operate the Tunnel. Shares in eur Tunnel fell 3.7 percent wednesday on the Paris bourse after Martin Bougues chairman of the Bougues construction company of France said at a news conference on tuesday that Quot one cannot completely exclude the hypothesis that eur Tunnel will go  he added that Quot the project has skidded off course and the situation is  the Channel s two rail tunnels were completed in May and june of last year but they still have to be equipped with Power systems signals air conditioning and other equipment. On completion the shuttle service Between san Gatte France and Folkestone England should about 35 minutes. Bougues was the first executive involved with the Tunnel to mention a possible bankruptcy. In reaction Annabel Salmon a eur Tunnel spokeswoman said Quot we were astonished by tins unfounded  while a bankruptcy could cause Large financial losses for investors and creditors of the project it is unlikely that it would permanently halt the Tunnel s completion. Bougues France s largest construction firm is part of a consortium of five French and five British companies known As trans Manche link trans Manche is seeking $2.6 billion m extra payments from eur Tunnel for work already done. Fhe construction companies say eur Tunnel owes them the Money because of its ongoing demands for More Complex and expensive work. Eur Tunnel is contesting that claim and company officials suggested that bouy guest angry statement might have amounted to posturing. The Bougues company did not return Telephone Calls seeking elaboration. But analysts while generally describing Bougues warning As exaggerated said the plight of Europe s largest construction project was disturbing. Quot it was originally budgeted at $8.7 billion Quot said Mark me vicar. An analyst at county Nat West Wood Mackenzie. Quot now it s budgeted at $14.7 billion and we still Don t know what the final Cost will be we Don t know when the Tunnel will open whether the conflict with contractors will be resolved or what Revenue to expect. It s All very vague an analyst at us Phillips amp Drew who insisted on anonymity said that Quot the risk of investing in eur Tunnel is now enormous and the possibility of bankruptcy cannot to Nulod out eur Tunnel whose shares were floated in 1987, was ordered by an Independent arbitration panel in March to begin paying $91 million a month to contractors toward a disputed $2 6 billion claim the order was described by eur Tunnel s chief executive sir Alastair Morton As Quot a hand grenade tossed in the midst of negotiations with contractors and the company has appealed to the International chamber of Commerce in Brussels. Salmon said negotiations were continuing with contractors on a settlement because arbitration in Brussels could take years. The two sides Are still believed to be about $900 million apart with eur Tunnel insisting that the contractors had agreed to a fixed payment and the contractors countering that the payment from eur Tunnel must reflect their costs the dispute appears to be slowing Progress on the Tunnel. Philippe Montagner a Bougues director responsible for the group s Tunnel operations said the week that the Tunnel was unlikely to open before Muich 1994. Quot under the Best scenario with everyone working hand in hand i Don t see completion before Early 1994,&Quot he said. Every time the completion Date is put off so is the Start of much needed Cash flow for the highly indebted eur Tunnel operating company which has estimated its first year Revenue at $1.15 billion at least partly because of the delay the company has defaulted on its loan covenants with the 206-Bank Syndicate backing the project and is urgently seeking a waiver from the Banks to tap into the next vein of their $12 3 billion loan. Eur Tunnel has already used about $7 3 billion of that total financing. Colin Comery the National Westminster Bank executive heading the team of Lead Banks said the whole Syndicate was to vote this week on granting the waiver he declined to comment on the Likely outcome. The agent Banks for the Syndicate Are National Westminster and Midland from Britain and credit Lyonnais and Banque natio Naie do pans of France asked about Bougues suggest on of a pos Sib o eur Tunnel bankruptcy Comery said Quot i certainly Hope it does not come to  analysts said it was almost certain that the Banks would approve the waiver to keep eur Tunnel operating. Quot having already paid out $7.28 billion you Don t just pull the plug Quot Mcvicar said. In All eur Tunnel has about $16.2 billion of equity and Loans. Given the postponements and the disputes with contractors analysts say the company May be forced to try to raise More Money to survive amid scepticism from Banks and the Stock Market. Readers action line editor s note the action line will not appear today because of a delay in receiving responses to a number of queries. The draw Down cutbacks in staff and other factors have combined to produce the shortage according to military officials. The action line will resume As soon As answers Are received by the stars and stripes Page 16 a the stars and stripes saturday. May 30, 1992