London & Continental Railways, the company which has been chosen to build the #5.8bn Channel tunnel rail link, announced plans this week to sell off future tax losses in a bid to help finance the 12-year project.
LCR aims to raise between #60m and #80m in new equity over the next few months, and up to #360m over the next 12 years by selling off future losses before the project breaks into profit. The 68-mile rail link is due to be completed in 2007.
The companies which choose to buy LCR’s shares will receive tax relief to offset against their own profits. The original financial package collapsed in January, but was revived in May when the government endorsed a revised financing deal guaranteeing financing costs of around #600m.
Both Ernst & Young, LCR’s auditor, and the Inland Revenue declined to comment on the details of the LCR project.
Ian Stewart, head of tax marketing at KPMG, said smaller companies feel the burden of due diligence costs when trying to attract new investors.
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