Eurotunnel looks for light during crucial debt talks

PARIS, July 11, 2006 (AFP) – The board of Eurotunnel, the company operating the rail tunnel linking France and Britain, was meeting creditors on Tuesday hoping to restructure huge debt and avoid a crisis by a Wednesday midnight deadline.

To avoid declaring bankruptcy, Eurotunnel hopes to convince all of its creditors to accept a deal to restructure its debt mountain of EUR 9.0 billion (11.5 billion dollars) and put in place a refinancing plan.

In May, the majority of its lenders agreed to a plan, but the owners of Eurotunnel bonds, including investment banks such as Deutsche Bank, have refused to accept the terms.

Eurotunnel operates the twin rail tunnels that run under the English Channel carrying passengers, cars and freight from Folkestone in southern Britain to Coquelles in northern France.

The financial difficulties experienced by the group has not disrupted the operation of the tunnels so far, and given the political importance of the project even a bankruptcy is not expected to close the link.

The chief executive and chairman of the group, Jacques Gounon, has said that a deadline of midnight on Wednesday represents the last chance to agree a deal.

If not, the group will have no alternative but to declare bankruptcy, he has said. However, some shareholders have stressed other options that are available to the company.

In the worst and most unlikely scenario, bankruptcy could lead to the company being liquidated with mass redundancies for Eurotunnel’s 2,600-strong workforce.

A judge, who would have responsibility for reviewing any bankruptcy request from Eurotunnel, could decide to place the company under administration, which would lead to the freezing of debt repayments and could see assets of the group sold to raise cash.

Under administration, the group would be managed by an administrator who would have responsibility for implementing a recovery plan aimed at helping the company to trade itself out of trouble.

A court might also nominate a mediating judge who would be tasked with meeting the creditors of Eurotunnel and trying to find an agreement on a debt refinancing deal.

In another possible scenario, the main lenders to Eurotunnel such as US investment bank Goldman Sachs could take control of the group and operate the tunnel to repay their loans.

Lawyer Georges Berlioz, who was an advisor to Eurotunnel during 2004-2005, told AFP that he thought bankruptcy was now inevitable for the group.

He “doesn’t see how Eurotunnel can avoid filing for bankruptcy.”

However, Arco, an organisation representing Eurotunnel bondholders, has urged Eurotunnel to avoid bankruptcy by pushing back the deadline to renegotiate the debt from Wednesday at midnight to January 2007.

Gounon has indicated that he does not expect to ask for another delay.

Arco has also proposed its own debt-restructuring plan, which the management of Eurotunnel has thus far refused to consider.

Creditors and management hope to come to an arrangement during their talks on Tuesday and Wednesday, but even success would not signal the end of the negotiations.

Shareholders in Eurotunnel would also be required to approve any refinancing plan and some have already expressed their hostility to the idea.

Shareholders are set to meet on July 27.

Subject: French News