EuroBusiness Media (EBM): Groupe Eurotunnel, the channel tunnel operator, is launching a 915 million euro rights issue, Jacques Gounon welcome, you are the CEO of Groupe Eurotunnel. This rights issue is the second phase of a previously announced capital increase. Why was the second phase necessary?
Jacques Gounon (JG): After the restructuring, when we halved the debt, we now have the possibility for new perspectives, new visions for the company. And so the best way, in order to have a sound and very strong, robust capital structure is to make a capital increase, in two stages. The first has been very successful through a specific tool in February, and now we have a very conventional rights issue, which is much more devoted to the existing shareholders through a discount. The full amount of 915 million euros has been fully underwritten by the banks, so it shows that there is a real appetite for such investment, which is a long-term infrastructure concession.
EBM: To what extent is this rights issue an opportunity for investors today?
JG: We have two categories of investors. The existing shareholders - and so with the free warrant they will receive they have the possibility of subscribing at a very interesting and discounted price, minus 28%, and I would like to underline that it’s not a rescue discount, it’s something which is fair, in order to enable them to have a kind of pay back on their previous investment, and for the other part of this rights issue we are targeting some long-term investors, like pension funds, like infrastructure funds, because they are keen on such investments, high predictability and the best cash flows we can see in this kind of company.
EBM: How is this rights issue consistent with the strategy you’ve been implementing for the last two years?
JG: We have already considered that we need, regarding the capital structure, to have a mix between existing shareholders, retail and long-term investors in order to present some further developments. What is important is the fact that in the full amount of 915 million euros we will use – let’s say 725 million euros in order to redeem the notes - but we have a remaining capacity of close to 200 million euros in order to invest, either by redemption of the notes 1 in order to strengthen the capital structure and to have an additional accretion, but perhaps to make some investments or to consider any partnership. It’s always a good thing for a company to have some possibilities like that.
EBM: Is there any foreseeable potential dilution for shareholders?
JG: Not at all because this is exceptional -- but we know that within the Eurotunnel story there are sometimes some good surprises – we had our first profits ! – but in this case the capital increase makes an accretion for the shareholders because it’s a substitution between a share – the new shares which will be issued – and the shares which would have been the consequence of the notes conversion. I would like to add that for the shareholders who will keep their shares for roughly three years, they will have a loyalty premium, which means an additional number of shares which will be granted to them in order to increase their stake within the company.
EBM: Speaking of retail investors, what had you planned to keep them specifically informed?
JG: We always focused on very clear, transparent and full information for the shareholders because I believe that it is one of my first responsibilities. And so for this existing rights issue, which of course is a very short period - which is the Spring period - because it will be closed on the 16th of May for the individual shareholders, we will make a lot of advertisements, TV spots and things like that just to say “Look, it exists, you have the possibility of making a good deal. It’s of course your decision, but don’t forget, don’t miss the deadline which is the 16th of May”.
EBM: You mentioned earlier that Groupe Eurotunnel has reported its first profit ever in the company’s history. How much of that profit was a one-off item or an exceptional item, or how much of that should be deemed a solid basis for recurring and durable profit for the group for the future?
JG: We had an exceptional restructuring profit which is over 3 billion euros, which unfortunately is one-shot, but we had our first profit - which is 1 million euros - just to give the signal that, year after year, we will increase such profitability for two main reasons: we are ahead of our business plan – and dramatically ahead – and on top of that, through the rights issue, we are decreasing to a very lower level the volume of financial interest to pay. So we have these two moves which are in the right direction, which will give additional profits for the future.
EBM: What kind of dividends could investors hope for, for the future?
JG: I think that with the existing trend, there is no difficulty for the shareholders, because it’s their decision, to have the pleasure to vote, in the next AGM in 2009, the first dividend - which will be the first - which means, in my view, there will be other dividends later. We will see what is the right level of this first dividend, but a yield which could be 2% seems reasonable, when we look at the very positive results we are getting right now.
EBM: Lastly, judging from everything you’ve said so far, it would appear that you’re all set to beat your own business plan expectations. Are there any chances that you’ll be revising upwards your business plan?
I think it’s quite exceptional that a listed company will provide the public with full detailed information for the next three years. What I can say is the fact that this is something which could be considered as protected – that means the company will deliver above such business plan – my goal of course is to provide more results above that, but I cannot take commitment. I can just say: “Please, when you look at what has been done, trust the future with us and please invest in the company”.
EBM: Jacques Gounon, CEO of Groupe Eurtonnel, thank you very much.
JG: Thank you.
