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Last Updated: Thursday, 16 June, 2005, 16:28 GMT 17:28 UK
Q&A: The crisis at Eurotunnel
Eurotunnel train
Eurotunnel's future is far from secure
For Eurotunnel shareholders planning to attend the troubled firm's annual meeting on Friday afternoon, the event promises to be a tempestuous affair.

BBC News examines what is at stake for the Channel Tunnel operator at the meeting, to take place outside Calais.

Isn't there going to be a vote of some sorts?

Indeed. The centrepiece of the day's events is scheduled to be a vote on who will continue to lead the company and manage its ongoing struggles with a 6.4bn ($11.58bn) debt mountain.

On the one hand there is Eurotunnel's current chairman, Jacques Gounon.

He has warned that the company could go bankrupt by October if it does not secure a new agreement with its creditors, and proposes taking a firm line with the company's 200 banks and other lenders.

Jacques Gounon, current Eurotunnel chairman
Jacques Gounon wants to be tough with Eurotunnel's creditors

He wants them to write off two thirds of Eurotunnel's debts - about 6.5bn - without gaining any shares in the company as compensation.

In contrast, former Eurotunnel chief executive Jean-Louis Raymond wants the company to adopt a much more conciliatory and consensual position with the creditors. He believes Mr Gounon's plan is too aggressive, and probably unachievable.

Mr Raymond also wants to slim down costs.

The difference of opinion between the two saw Mr Raynond resign on 10 June.

Both men are now seeking to win the shareholder vote to become the new joint chief executive and chairman.

What does this mean for travellers?

In the short term, very little.

The business is continuing to run, and the last thing that creditors want is for the tunnel to cease operation.

Depending on who wins the vote - and on how the negotiations go - the most likely difference could be Eurotunnel's prices.

New management could mean a new pricing structure. But whether that means higher prices to pay off debts faster - risking a stampede of passengers to ferries and cheap flights - or even lower prices to lure them back remains to be seen.

How did Eurotunnel build up such a debt mountain in the first place?

The company was handicapped by debt from the first moment it began services in May 1994.

It started life a year behind schedule and 2bn in the red.

All might have been fine if Eurotunnel - which has the licence to carry cars, lorries and their occupants through the Channel Tunnel - had met its performance targets.

But this has never been the case. Eurotunnel found itself not only competing with ferry companies - which slashed prices to stay in the market - but with the new breed of low-cost airlines as well.

As a result, its debts simply grew and grew.

What about Eurostar?

Eurostar - which carries foot passengers on trains from London to Paris, Brussels and other cities on the continent - is a completely separate company from Eurotunnel.

Eurotunnel's former chief executive Jean-Louis Raymond
Jean-Louis Raymond wants a more conciliatory approach

Profitable and popular, it pays Eurotunnel a fee based on traffic numbers to use the Channel Tunnel.

But Eurotunnel managed to overestimate the likely number of passengers by a wide margin, further denting its business plan.

One analyst described Eurotunnel's overall passenger estimates as "completely potty".

What is the future for Eurotunnel?

As chairman Jacques Gounon admits, the company has until October to reach an agreement with its creditors or else face bankruptcy.

Mr Gounon promises a bullish approach to the ongoing negotiations, while Mr Raymond wants more diplomacy and agreement.

Some analysts believe a majority of shareholders will back Mr Gounon because his tough approach - refusing to give creditors shares - better protects their stake in the firm.

But others say Mr Gounon's current plan will not be successful and that shareholders should instead back Mr Raymond, because his policy is more realistic.

The vote, which also comes weeks after Eurotunnel reduced prices, will be known sometime on Friday.

One shareholder group - Adacte - says that whatever the result of the vote, the dispute has not been helpful.

"Fighting over power is just astonishing in a company where shareholders have lost so much money," said Joseph Gouranton, chairman of Adacte and a member of the Eurotunnel board.




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