Rivals criticise SBC over role in Eurotunnel rights: Swiss Bank demands 'nearly scuppered deal'
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Your support makes all the difference.SWISS BANK Corporation came under attack yesterday for its role in the Eurotunnel rights issue as rival underwriters claimed that the bank's tough negotiating stance almost scuppered the deal at the eleventh hour.
The criticisms emerged in the wake of confirmation that SBC was by far the biggest underwriter, backing nearly a third of the pounds 858m issue.
In the event of a flop the bank guarantees to take the stock and pay Eurotunnel, thus ensuring that the issue works whatever happens to the company's share price in the days until the issue closes.
Market sources claimed that the issue was threatened by demands made by SBC during an all-night negotiating session on Wednesday that delayed agreement until breakfast time.
'Salomon Brothers had to get Deryk Maughan (its chairman) out of a dinner party at midnight for approval of the changes,' one source said.
SBC was also said to have put heavy pressure on other banks to improve the terms of the London sub-underwriting in its own favour to reduce its risks.
The sub-underwriting takes place in the aftermath of the main underwriting agreement. The big underwriters sell some of their risk to other institutions.
This process - a London speciality unknown in Paris - was earmarked for pounds 200m of the Eurotunnel rights issue. The other three-quarters was to be underwritten directly by a few large banks.
Market sources said SBC demanded and got a bigger share of the London sub-underwriting than its due - allowing it to pass more of the risk on immediately and reduce its overall exposure. In particular, sources claimed SBC failed to pool its own sub-underwriting clients with other firms.
The row continues a feud that last erupted over SBC's role in a rights issue by Trafalgar House.
Meanwhile, Christian Cambier, the head of a French association for Eurotunnel shareholders, called for an inquiry into the movement of shares ahead of the rights issue.
Eurotunnel shares rose 11p to 359p yesterday.
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