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Eurostar in talks to head off cash crunch, warns majority shareholder

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Eurostar is in advanced discussions to seal aid from the UK and France and needs to finalise it by next month to head off a looming cash crunch, said the head of SNCF, the state-backed French rail group and largest shareholder in the Channel Tunnel train operator.

“We are getting closer to the moment when Eurostar will have real cash flow problems . . . By next month, we have to conclude these discussions,” said Jean-Pierre Farandou, SNCF chief executive, in an interview with the Financial Times.

Farandou said both the French and UK governments were in “ongoing very advanced discussions” with Eurostar over possible state-backed loans that would allow the struggling train operator to get through the coronavirus crisis. 

Eurostar, in which SNCF holds 55 per cent of the shares, is at risk of bankruptcy following a drop in travel since March 2020 of at least 95 per cent.

Shareholders, which also include Canadian institutional fund manager Caisse de dépôt et placement du Québec, Hermes Infrastructure and the Belgian state rail operator, have already pumped in €200m to keep Eurostar afloat during the crisis, but the company said this money was “finite”.

“We hope that it will be weeks [not months] because the financial situation is going to be very difficult at the end of May, start of June,” said Farandou, who would not be drawn on the overall size of any French loan or whether it would go through SNCF or directly to Eurostar. 

SNCF has itself already received billions in French government support after Eurostar traffic plummeted because of Covid-19 travel restrictions, which came on the heels of prolonged strikes by labour unions over reforms to pensions and the company itself.

Eurostar, which has its headquarters in London, has held conversations with the UK government over the possibility of a state-backed commercial loan to help it through the disruption, although there is no guarantee that there will be an agreement, according to two people familiar with the discussions. 

Eurostar has discussed £60m of loans backed by UK Export Finance, which helps UK companies access finance and was originally set up to support businesses following Brexit, said one of the people. Eurostar and both the French and UK governments declined to comment.

Airlines easyJet and British Airways have received UKEF backing for loans worth more than £3bn since December to help their businesses through the disruption caused by the pandemic, while Rolls-Royce has also taken advantage of the scheme. 

But the UK government has for months insisted that Eurostar is not a British company and that the French state should take the lead with any financial support. 

Grant Shapps, transport secretary, told MPs last month that the government was “very keen” for Eurostar to survive but added “it’s not our company” to support. The UK sold its stake in the train operator in 2015. 

Eurostar runs the trains that connect the UK to France, Belgium and the Netherlands, but does not own the Channel Tunnel itself, or the high-speed lines the trains use. 

Its chief executive Jacques Damas told the FT this month that the company’s international footprint has allowed the British and French governments to each wait for the other to step in with help. “I’m fed up with both governments,” he said. He added that he has told the UK ambassador in Paris and the French ambassador in London to “stop your stupidities”. 

The train operator had previously pointed to government-backed loans “that have been awarded to airlines” and asked “that this kind of support be extended to international high-speed rail”.

“Eurostar is even more important after Brexit,” said Farandou, who had worked at SNCF for 40 years before taking over in November 2019. “It’s worth the cost of fighting for Eurostar. Eurostar is strategic, it’s geopolitical.”

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