Debt restructuring seems to be the only solution for the leading Channel Tunnel Operator, Euro Tunnel, who is under immense pressure. They ought to be, for if the debts are not written-off (at least €9 billion, i.e. $15 billion), within a span of two years, it will declare 'insolvency'. This will further lead the two governments in dilemma, as it would be either supporting the creditors or the 800,000 shareholders.
The Euro Shareholders have suffered enough, with majority of them being the French investors and expecting more from them is just impossible is what the Eurotunnel Chairman, Jacques Gounon expresses. The company can barely manage a debt repayment of E3.3 billion and if no “rescue measures are put in force” then it will not be able to make it through the very first quarter of 2007.
Severe competition faced by the truck markets and due to significant fall in the shuttle passengers, the revenue plummeted to 7%, which is E285 million. Besides a net loss of E570 million in the year 2004 was drastically witnessed from cross-channel ferries and low-cost airlines as declared by the Chairman.
In spite of all this, the chairman is indefatigable, and is “determined to protect the interests of the company with an aim to reduce the burden of financial charges.” The company was bestowed with a waiver to its credit agreement, which created the base for renegotiating debt to reduce interest payments, but it still remains wrapped with interests amounting to E298 million last year vis-à-vis E318 million in 2003.
Though the discretion lies with the bank to declare the tunnel operator insolvent and personally take charge of the operations, after firing the management, it is quite unlikely that the latter will do so. This of course is not the right way out. On the contrary the creditors will have to explained the circumstances and the “inability” to pay debts.
To add to all this, is the underlying fact that the Tunnel Channel, being almost 15 years old, will require enormous expenditure on maintenance and investment. The market value of the Tunnel being approximately E4 billion, is almost less than half nominal value of E9 billion.
The biggest inevitable pressure however, is that Eurotunnel will have to make cash payments of interests instead of the present scenario wherein they have a blend of debt and cash.
Discussion with the creditors is expected to end after a span of 18 months, and we sincerely hope that a solution emerges which will enable Eurotunnel sail.
Posted
on : Tue, 03 May 2005 11:25 GMT | Business News
By : Pippa Fielding
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