Court delays Eurotunnel ruling until August 2

26th July 2006, Comments 0 comments

PARIS, July 25, 2006 (AFP) - Eurotunnel must wait eight more days for a court ruling on measures that would freeze its colossal debt, but the group hopes creditors will reach an accord on their own by then.

PARIS, July 25, 2006 (AFP) - Eurotunnel must wait eight more days for a court ruling on measures that would freeze its colossal debt, but the group hopes creditors will reach an accord on their own by then.

The Paris Commercial Court decided Tuesday to delay a decision until August 2 on safeguard measures that would freeze debt of more than EUR 9.0 billion (6.2 billion pounds, 11.5 billion dollars) owed by the Franco-British company that operates twin rail tunnels linking France and England beneath the Channel.

"The decision has been delayed until August 2 because of the complexity of the matter and the number of judgements to be given," said Jean Veil, a lawyer for the company which is threatened with liquidation.

"This extra delay allows negotiators to sit down and find a solution in the meantime."

Discussions between creditors continued while the court examined the case, the lawyer added, and "negotiations always take place at the last minute."

Eurotunnel has warned that if a plan to halve and restructure its debt is not agreed by the end of September, it will be destined for liquidation.

The business has enough cash flow to keep operating until the beginning of 2007 however, and experts say that in any event trains would continue to run through the tunnel for the foreseeable future.

In a statement, Eurotunnel said Tuesday that it considered the postponement "opportune."

The company said there was an "implicit consensus" that its sustainable level of debt was about 2.9 billion pounds and that existing shareholders must retain a significant proportion of the equity.

"There is no reason why the creditors should not rapidly come to a consensual restructuring agreement within this framework," the statement said.

After talks between the company and creditors collapsed two weeks ago, Eurotunnel chief executive Jacques Gounon said: "I call sincerely on the junior and subordinated (bondholding) creditors to negotiate.

"It is no longer up to the company. There is no use asking me to negotiate.

"It's now up to all of the bondholders to meet up by themselves."

On Tuesday, Jean-Pierre Mattei, chairman of the Arco group of bondholders backed by Deutsche Bank, told a news conference that a deal was potentially "very close."

"Everyone wants a lasting solution for Eurotunnel," Mattei said.

Eurotunnel said it had paid EUR 114 million worth of interest due on the debt on Tuesday, adding that "arguments relating to default of payment should not be used to justify a rupture in negotiations."

The safeguard measures, similar to US Chapter 11 bankruptcy proceedings, cannot be granted if a group is in default of payments.

If the court accepts the debt-protection application, Eurotunnel will be able to freeze its debts and interest payments while continuing to operate. The court would appoint one or two officials to negotiate a settlement, so that even if the current talks fail, discussions could continue in a legal framework.

The talks have been under way for 15 months with the aim of preventing Eurotunnel going bankrupt in about six months when it is to begin paying off the capital of its debt.

Liquidation could be avoided if the main creditors, namely the banks that lent Eurotunnel money to finance the Channel Tunnel project, took over the company to reimburse their debts, Gounon has explained.

Eurotunnel's debts are split between three categories of creditors: senior (EUR 532 million), junior (EUR 5.77 million) and "subordinate," or bondholders (EUR 2.7755 million).

Debts would be reimbursed in that order.

The company employs 2,300 people and is comprised of two holding companies, one in France and the other in Britain.

The French holding company has around 800,000 shareholders, most of whom own small stakes.

Copyright AFP

Subject: French News

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