Japan banks set to join pounds 700m Eurotunnel loan

INDUSTRIAL BANK of Japan yesterday confirmed it was subscribing to a vital pounds 700m loan to Eurotunnel amid reports from Tokyo that several other Japanese banks were also ready to join.

As Eurotunnel's bankers continued their campaign to bring the rest of the Japanese into the deal by the end of the week, the company expressed confidence that it would raise the full amount.

British and French banks have responded positively, and the Japanese are the main stumbling block.

A spokesman for Industrial Bank, one of the leading lenders to Eurotunnel, said the bank would advance another pounds 15m, adding: 'In our judgement this is an essential project'.

The Japanese daily newspaper Nihon Keizai Shinbun said Yasuda Trust & Banking, Sanwa Bank, Bank of Tokyo and Long Term Credit Bank of Japan will also be lending new money. However, their contribution will still fall well short of the pounds 160m target for funds from the Japanese banks.

It is thought a number of banks may be unable to contribute in the wake of the Japanese property lending crisis, so a financing gap as large as pounds 50m could remain.

This would add to Eurotunnel's problems in raising new equity of possibly as much as pounds 900m. A waiver granted by the banks in November 1992 because Eurotunnel breached its loan covenants runs out on 31 May, when the company's cash resources will also be all but exhausted.

In London there was confusion over Eurotunnel's forthcoming rights issue. Sir Alastair Morton, the co-chairman, initially dismissed Monday night's reports about the increased size of the rights issue as 'pure speculation', confirming only that it would bring in around pounds 700m.

But he later made clear the issue could be well over pounds 800m when he confirmed that Eurotunnel would be raising up to pounds 1.6bn in total.

With a maximum of pounds 700m expected from the banks, that suggests anything up to pounds 900m could be required from shareholders. If banks fall short of their target, the demand could be for still more.