−£611milliononrevenuesof£456million.Byanymeasure,
it was a firm in financial trouble.
Muchofthefinancingforthetunnelhadcomefromdebtand,
attheendof1997,Eurotunnelhaddebtobligationsinexcess
of£5,000million,raisedfromavarietyofbondissuesand
bankdebt.Addingtheexpectedinterestpaymentsandcoupon
paymentstothedebtbringsthetotalobligationsofthefirm
up to £8,865 million.The following table summarizes the
outstanding debt at the firm, with our estimates of the
expected duration for each class of debt.
Debt Type
Face Value (Including Cumulated
Coupons) (£ millions)
Duration
(Years)
Short-term 935 0.5
10-year 2,435 6.7
20-year 3,555 12.6
Longer-term1,940 18.2
Total/
Average
8,865 10.9
The firm’s only significant asset is its ownership of the
tunnel, and we estimated the value of this asset from its
expectedcashflowsandtheappropriatecostofcapital.The
assumptions we made were:
- Revenues willgrow 10% a year for thenext five
years and 3% a year in perpetuity after that. - Thecostofgoodssold,whichwas72%ofrevenues
in 1997,willdropto 60%of revenuesby 2002 in
linear increments and stay at that level.