Eurotunnel waits on last bend to avoid liquidation

PARIS, July 25, 2006 (AFP) – Eurotunnel was waiting on the last bend towards liquidation on Tuesday for a court decision on debt protection or a last chance rescue from creditors.

A Paris commercial court was to announce its decision later in the day on a request by Eurotunnel two weeks ago to protect it from a debt mountain of EUR 9.0 billion (11.5 billion dollars).

Several sources close to the matter say that Eurotunnel and creditors have been discussing new proposals for a debt deal, but apparently without success.

Eurotunnel, which operates twin rail tunnels linking France and England beneath the Channel, has warned that if a plan to halve and restructure debt is not agreed by the end of September, it will be destined for liquidation.

Chief executive Jacques Gounon has set a deadline: If “at the end of September Eurotunnel cannot propose a (restructuring) plan at the shareholders’ meeting, there will be a liquidation.”

The business has enough cash flow to keep operating until the beginning of next year. Experts say that in any case trains will continue to run through the tunnel for the foreseeable future.

Gounon made the application immediately after the collapse of two days of talks with bondholders in the form of investment funds and investment banks.

One source close to continuing contacts between the company and organisations to which it owes money has commented: “There is nothing much very concrete coming out… But positions can get closer very quickly or move apart very quickly.”

Gounon said after the collapse of negotiations two weeks ago: “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.”

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 begins to pay 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 32 million), junior (EUR 5.77 million) and “subordinate”, or bondholders (EUR 2.7755 million).

Debts would be reimbursed in that order.

Subject: French News