News From telegraph31 May 2007 09:30
Eurotunnel
Avoid
Even a discussion of Eurotunnel by Questor is one that would have seemed impossible two years back. Struggling under billions of pounds of debt, and with a business plan based on projections that were never going to be met, the business got off to a very bad start. However, since the Channel Tunnel operator completed its radical restructuring, its shares have been going like the proverbial TGV.
After being halted at 25p prior to the debt-for-equity swap, the shares jumped 56pc to 39p on Tuesday, their first day of dealings, and then almost doubled yesterday.
Yes, the company is in a better shape than it was, with just £2.84bn of debt, against its original £6.4bn. But there are still a number of complex instruments in place which make this less than plain sailing. The more positive might point to the strength of British Energy's shares after its own debt-for-equity swap, but even that has had its problems.
Charles Stanley's Robert Corden says the value is now way above that of an equivalent infrastructure business, but stresses it is unlikely to be on the receiving end of a takeover offer. Instead, he says, the surge is more likely to be due to a big short position after trading resumed.
For those who fancy themselves as something of a day trader, and who have money to burn, then by all means buy the shares. For the rest, Questor included, the shares are immensely difficult to value properly, and should be avoided.
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