Thatcher 'pledged support' for Eurotunnel loans

RUSSELL HOTTEN

and DAVID HELLIER

Baroness Thatcher, the former prime minister, was drawn into the Eurotunnel crisis last night after it emerged that some Japanese banks believe she had promised that no British government would let the project collapse.

Hopes that the UK and French governments might eventually rescue Eurotunnel may explain why the 25 Japanese banks have proved resistant to an immediate solution to the company's debt nightmare.

Senior sources involved in the restructuring talks have told the Independent of a letter signed by the former Prime Minister encouraging Japanese investors to support the project.

The news emerged as the governments down-played the revelation that Eurotunnel had asked London and Paris to guarantee a bond issue to help free it of its pounds 8bn of debts. As the Independent reported yesterday, Patrick Ponsolle, Eurotunnel's co-chairman, warned the French government that it faced a financial scandal unless it provided the support.

Japanese banks were initially unenthusiastic about investing in the Channel Tunnel when the government was trying to drum up support for the private sector project in the mid-1980s.

A second attempt by the financial advisers to bring them on board succeeded and, according to one French source, Lady Thatcher's views were central in persuading them. "The letter is vague, but I can see how it might have been interpreted as a promise of government support," he said.

Japanese banks have persistently claimed that they only took part in the project after receiving what they took to be, in effect, a UK government assurance that the project would not be allowed to go down. Ever since Eurotunnel announced it was suspending interest payments on its junior debt, the Japanese bankers in London have been considering whether they might have a claim against the UK government.

Yesterday one banker said that a letter from Lady Thatcher existed, although he had not seen it. "Certainly arms were twisted and many bankers working for Japanese banks in London who had turned down the opportunity to lend to the project found that their superiors were pressing them to change their mind," said one banker yesterday.

Eurotunnel's problems come at a time when most of the Japanese banks are experiencing severe problems in their domestic market. They are said to be adamant that any financial restructuring should not mean they share any more pain, and that the governments have a responsibility to help. Both the Department of Transport and 10 Downing Street said they were not aware of such a letter.

France and Britain yesterday rejected attempts by Eurotunnel to involve the two governments in a rescue. William Waldegrave, chief secretary to the Treasury, told Parliament that Eurotunnel was a private sector company and the Government would not get involved. "There is no change of policy on this matter," he said. In France, a government source said: "We respect the principle of non-intervention by the state."

However, a Eurotunnel spokesman in Paris said discussions over government support for a bond issue took place in the past few months, and they had not formally had a reply.

Bankers are deeply sceptical of Eurotunnel's chances of getting British and French government backing. A bond issue is a way out, but it could never be sold to investors without a government guarantee. "And there's no chance of this," said a transport analyst.

The Department of Transport confirmed the talks with Eurotunnel but would not give any details, saying that while finance was discussed, the details were commercially confidential.

On Wednesday Mr Ponsolle said he believed the Labour government would be more sympathetic to Eurotunnel's plight. But Alastair Darling, Labour's City spokesman, said yesterday: "Eurotunnel need not look to us to bail it out."