CRUCIAL VOTES which took place on November 27 and December 14 have secured approval from a majority of investors holding Eurotunnel’s ?6?2bn of loans, bonds and other debt to a Safeguard Restructuring Plan put forward by the Channel Tunnel operator on October 26. This would see ?3?36bn written off by its current creditors, with the remaining ?2?84bn refinanced as senior debt by a banking consortium yet to be appointed. The objective is to bring the debt down to a level where the company has some prospect of meeting its interest and repayment obligations out of operating profits, given a realistic assessment of increases in traffic and revenue over the remaining years of the concession which expires in 2095.The plan was negotiated under the pro-tection and supervision of the Paris Tribunal de Commerce, which agreed on August 2 to apply a Safeguard Procedure (RG 9.06 p502). This allowed Eurotunnel to suspend the payment of interest and principal falling due under its complex financing arrangements. These were previously restructured (and made even more complex) in 1998 in the hope that the company could meet its obligations out of revenue.The commercial court appointed representatives who assisted Eurotunnel in negotiating a restructuring package that was both realistic and would satisfy most if not all of the parties involved. They appear to have been successful in persuading the creditors to vote for the plan, although the deal is by no means done. In the first place, one of the largest holders of junior debt, Oaktree Capital Management, applied to the court on December 14 for a review of procedures used on November 27, which it claims allocated multiple votes to certain creditors who are members of the financial establishments committee.It was holders of senior and middle ranking debt that voted in November. Two-thirds by value had to support the plan, and 28 creditors (out of 35 present) representing 72% duly did so. Criteria for the proportion of debt represented were also met.On December 14, where a two-thirds majority was also required among two separate groups of the most junior debt holders, the margin was even narrower with only 69?2% in favour among 88 sterling bondholders, although the 102 euro bondholders were 82?2% in favour. This result has also been challenged, this time by Resurgence Capital on the grounds that holders of resettable bonds, stabilisation notes and participating loan notes should have been asked to vote separately instead of being lumped together as sterling or euro denominated bonds issued by Eurotunnel Finance Ltd and France Manche SA.Results of the ballots were presented to the Tribunal de Commerce on December 18, and the court will decide whether or not to formally validate the Safeguard Restructuring Plan, having regard to objections already lodged. A decision is expected in January, but this could yet be challenged in a higher court.Then comes the final test. The plan calls for a new holding company, Groupe Eurotunnel, to be set up in which Eurotunnel’s shareholders will be invited to apply for convertible hybrid notes in exchange for their present units. Junior bondholders will also receive ?1?28bn of these notes, which are convertible to Groupe Eurotunnel units after three years, massively diluting the equity.If they don’t convert, shareholders will get nothing. But given that dividends remain at best a distant prospect, simply persuading hundreds of thousands of individuals holding Eurotunnel units to convert at least 50% of them could prove a formidable task. If this fails, the company faces liquidation.n