Eurotunnel excludes rights adviser: Morton moves to defuse City row that casts shadow over settlement

EUROTUNNEL'S co-chairman, Sir Alastair Morton, moved to defuse a row involving his City advisers yesterday by demanding that Swiss Bank Corporation's head of corporate finance, Brian Keelan, play no part in the company's pounds 750m rights issue.

Mr Keelan, SBC's managing director of investment banking in London, said on Tuesday that Eurotunnel's rights issue would take place in mid-May, would amount to between pounds 575m and pounds 750m and that SBC would play a senior role during the issue.

The remarks, given in an interview with Reuters, the press agency, infuriated the Eurotunnel chief and the brokers to the rights issue, SG Warburg. The ensuing row overshadowed the settlement of a long- running pounds 1.9bn dispute between Eurotunnel and the builders of the tunnel, Transmanche Link, to which SBC is financial adviser.

Eurotunnel issued a statement yesterday saying that, at the request of Sir Alastair, 'Rodolfo Bogni, chief executive of SBC in London, confirmed yesterday that Mr Keelan will play no part in SBC's welcome participation in the underwriting of the aforesaid rights issue'.

It said Mr Keelan's comments on the rights issue, 'its possible size, timing and underwriting were improper, incorrect and unauthorised'. It said the issue is to be made 'later this spring'.

While Eurotunnel still welcomed SBC's role in the rights issue, it said SBC would have to consult SG Warburg about its activities.

Mr Keelan was unavailable for comment as he had flown to Milan to start a holiday. Sources at SBC said his position as one of the bank's highest-paid employees had not been damaged by the row.

'We don't believe it would be appropriate to comment on this morning's comment by Eurotunnel, other than to say that Swiss Bank Corporation is looking forward very much to putting its considerable resources and skills - alongside those of Eurotunnel's other advisers - in making the forthcoming rights issue a resounding success,' an SBC spokesman said.

He stressed that Mr Keelan was an adviser to TML, not to Eurotunnel, and that as a merchant banker he would not have been involved beyond the initial planning stages of the issue anyway.

SBC has long been keen to break into the close-knit world of share issuing in London, and its perceived aggression in the Eurotunnel saga has ruffled City feathers.

Two further matters have caused irritation. SBC has given the impression that it was the main 'mover and shaker' behind the TML settlement, whereas others suggest the credit should go to Eurotunnel's two advisers, Morgan Grenfell and Banque Indosuez.

Secondly, while maintaining silence in public, SG Warburg has been irked that SBC has negotiated a slice of the lucrative underwriting business during the rights issue.

It is understood that SBC has obtained a commitment from Eurotunnel to underwrite at least 25 per cent of the issue, following SBC's role in solving the dispute with TML. Eurotunnel has already agreed to SBC underwriting a pounds 75m portion of the issue on behalf of TML as part of the settlement.

SBC has previously put City noses out of joint by trying to take away business from established houses such as Warburg, Cazenove, Kleinwort Benson and Morgan Grenfell.

In January, SBC and Robert Fleming staged an auction to place any leftover shares from a pounds 425m rights issue by Trafalgar House to the highest bidder, upsetting Cazenove and UBS, which preferred City practice of placing the shares with selected institutional investors.

SG Warburg Securities will be broker to the Eurotunnel rights in the UK and help to organise the underwriting, while three banks, SBC, Morgan Grenfell and Banque Indosuez, will decide how the underwriting cake will be cut.

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