CTRL debt funding sought

by Carol Millett



The Government is talking to a select group of major city debt consultants on how to finance the £3.7 billion of Government-guaranteed debt for the Channel Tunnel Rail Link.

But in the same week the Conservative opposition called for the debt to be included in the public sector borrowing requirement, arguing that CTRL was too high risk a project for the debt to be counted as a contingent liability.

The Government guarantee is part of the CTRL rescue package put together in June after the project nearly foundered earlier this year. Investors who fund the debt will not take on any risk of the project failing or being delayed.

Options being discussed by the Government and debt consultants range from an auction of the debt to an underwritten Eurobonds issue. The debt is expected to have a maturity profile split between 12 and 30 years. An initial tranche of £2.65 billion which will be used to fund Phase One of the project will be raised by the end of September.

A further tranche of just over £1 billion will not be raised until the construction of Phase Two is confirmed. Railtrack has an exclusive option to construct and acquire Phase Two. The option expires in 2003. It has yet to confirm that it will take up that option.

But Conservative MP Nick Gibb of the Treasury Select Committee criticised the way the Government is to account for the debt. "We have been told that it will be counted as a contingent liability rather than part of the public sector borrowing requirement. But we believe the risk attached to this guarantee is sufficiently high that it should be included in the Government accounts as a debt and not as a contingent liability."

l Railtrack's Chairman Sir Robert Horton gave details of the company's role in building the Channel Tunnel Rail Link at the company's AGM this week.

He told shareholders that construction of Phase One would begin in October this year and be completed by July 2003, when Railtrack will acquire the line at cost on lease until 2086.

He added: "Railtrack will pay the cost of construction, less grant funding, which in 2003 is expected to be £1.5 billion. In return Railtrack will be given a Government supported access charge from Eurostar from the date of acquisition. We will also share in the Eurostar revenue risk for a limited period, giving us all a further incentive to make that service the great success it deserves."