A PROSPECTUS due last month explains the deal with banks holding more than £8bn of junior debt which Eurotunnel hopes will enable the company to continue trading. Despite last November’s fire which will cost Eurotunnel and its insurers more than £200m, the restructuring deal is essentially unchanged from the package set out last October (RG 11.96 p699). In essence, about half the debt will be converted into equity or long term loans at low interest rates, seriously diluting existing stock.
Shareholders will be asked to approve the deal on July 10 and this is no formality, even if the Intergovernmental Commission permits the resumption of freight shuttles this month (below). Eurotunnel must first of all get 25% of the equity represented at the meeting, and then secure a two-thirds majority. Christian Cambier of the Association of Eurotunnel Shareholders is not the only person campaigning for rejection among the large number of individual French stockholders who have seen their shares plummet to 20% of the 1987 issue price. Even if Eurotunnel pulls that off, in October every single one of more than 200 banks must endorse the deal in a situation where - theoretically, at least - they can seize the assets leaving shareholders with nothing.
On April 24 Co-Chairman Patrick Ponsolle revealed that the 999-year lease granted last year to London & Continental Railways for the Channel Tunnel Rail Link was being used as a lever to persuade the two governments to extend Eurotunnel’s 65-year concession. Thus far, the British government has been even more reluctant than the French to heed Eurotunnel’s plea that ’a significant extension’ forms what Ponsolle calls ’a crucial part’ of the restructuring plan it will put to shareholders.
Eurotunnel’s directors believe their best hope lies with Britain’s Labour administration elected on May 1, which is remarkably free from ideological baggage. LCR’s public share issue is due in 1998, and will almost certainly fail if Eurotunnel is liquidated. This would leave Labour with the choice of seeing the CTRL and Thameslink 2000 collapse, or stumping up a 10-figure sum to rescue them. o
