1.9 While there was a risk that Eurostar UK could revert back to public ownership with £430 million of bank debt, the Department considered that the risk was offset by the likely profitability of the business. At the start of the competition to build the Link and before the Eurostar service was operational, transport industry experts expected Eurostar UK to gain a large share of the existing market for travel between London, Paris and Brussels. It was estimated that Eurostar UK would carry over 12.5 million passengers (single journeys) in 1996-97 and that numbers would exceed 15 million journeys by the end of the decade. As LCR had similar expectations for future Eurostar UK patronage, the Department did not challenge the forecasts.
1.10 Nevertheless, the Department foresaw potential risks, particularly because the award of the contract would be well in advance of the second stage financing. If the forecast growth was not achieved, the Department was concerned that LCR or its banks might seek to renegotiate the terms of the deal if a second stage financing could not be completed in the market on acceptable terms. Allaying this concern were three factors:
■ SG Warburg & Company Limited, LCR's principal financial adviser, considered that LCR could achieve the second stage financing even if Eurostar UK revenues were 15 per cent lower than forecast;
■ in the mid stages of the competition, LCR had the most strongly led and best developed marketing strategies for Eurostar UK; and
■ the Department's view that LCR's shareholders would not risk losing their £60 million equity investment without being confident that second stage financing was achievable.