Eurotunnel, the struggling Anglo-French company which operates the underwater rail tunnel joining Britain and France, has submitted its debt reorganisation plan to creditors. This step has been taken in an effort to help improve the financial position of the organization which is currently facing a massive debt of 8.9 billion euros (Approx $11 billion or £6.5 miilion).
The biggest privately funded road and rail network project ever, Eurotunnel handed over the details to a creditor group which controls about 4 billion pounds of its 6.4 billion pounds of debt, and which includes bond insurer MBIA Inc. Franklin Mutual Advisers LLC, the European Investment Bank and investment manager Oaktree. It however declined to give details of the proposal only revealing that it had presented "preliminary reflections.”
“The parties concerned felt that that the chances of positive results are better if the details of the plan remain under the carpet and the formation of a second creditor’s committee means the negotiation process could also get complicated,” according to a statement released by Eurotunnel. "We'll make a thorough study of the whole scheme and get back to Eurotunnel in the due course of time,” a creditor committee spokesman said without revealing any intricate details.
In a previous statement, Chairman and Chief Executive Jacques Gounon had said the company would go bankrupt by 2007 without any deals. Gounon, who cemented his position as chairman last month after seeing off a challenge from Jean-Louis Raymond, who had resigned as chief executive a week before but who remains on the board, wanted banks to write off at least 5 billion euros of Eurotunnel’s debt. Creditors however negated this suggestion.
Ever since its debt policy was refurbished in 1997, investment banks and hedge funds have bought into the company debt at heavy discounts. This has further led to a crammed community of creditors all having different issues ranging from long-term to speculative trades only making matters worse for Eurotunnel.
Formed in 1987 with the intention of controlling the rail tunnel linking Britain and France, Eurotunnel has failed to meet traffic forecasts ever since it began operations in 1994.
It is now under immense pressure to restructure its debt this year because all interests have to be paid cash from the end of December, unlike the current blend of cash and more debt.
Things are likely to take a turn for the worse in Spring 2006 if the auditors are unable to sign off the organization’s yearly accounts. The end of 2006 also will give a few headaches to Eurotunnel as a minimum tariff agreement on tunnel users termiantes, as will the beginning of 2007 when debt repayments are supposed to start.
Posted
on : Thu, 14 Jul 2005 13:20 GMT | Business News
By : Pippa Fielding
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