Eurotunnel seeks fresh debt talks

Eurotunnel wants a debt deal to "ensure the future of the group"

Channel Tunnel operator Eurotunnel plans to spend eight months talking to creditors about its £6.2bn ($11.6bn) debt, following a Paris board meeting.

However, the firm will first ask for a waiver to its credit agreement.

If debt talks started without the permission, it would give creditors the right to take control of the company.

The most likely outcome of the debt renegotiation is thought to be a debt-for-equity swap.

That would dilute investors' existing stakes, leaving them with a potentially miniscule stake.

Getting back on track

The companies creditors include the bank HSBC and the European Investment Bank.

The waiver would enable Eurotunnel to hold debt restructuring talks without incurring a technical default on its loan agreements.

The committee of main creditors has said it hopes to agree terms "shortly".

The board will continue to work to secure the long-term future of the group Jacques Gounon, Eurotunnel chairman Check the Eurotunnel share price

The waiver requires the approval of a majority of the creditors, which Eurotunnel said it expects to receive "as soon as possible".

Eurotunnel said a favourable outcome on the waiver request would allow talks to begin "with the intention of reaching a financial arrangement that will ensure the future of the group whilst at the same time maintaining shareholder interests".

'Constructive negotiations'

Members of the creditors committee released a statement on Wednesday saying agreement had not yet been reached, as some outstanding issues still had to be resolved.

"We hope to be able to engage in further constructive negotiations with the board, with the aim of agreeing acceptable terms for a waiver shortly," it added.

Eurotunnel's chairman Jacques Gounon will lead its debt negotiating team, with support from Herve Huas, who has stood down as deputy chief executive.

Mr Gounon said: "The convergence of positions between Eurotunnel and the ad-hoc committee (of major creditors) is very positive. The board will continue to work to secure the long-term future of the group."

Shareholder revolt

Last April, frustration at the firm's problems ended in a boardroom coup.

Eurotunnel's entire Anglo-French board was replaced with an all-French team after a revolt by rebel shareholders.

Shareholders, some of whom have lost 90% of the value of their investments, argued that the then management's restructuring efforts would not significantly cut the group's debt.

Eurotunnel is presently able to issue bonds for any interest it is unable to pay, but at the end of the year will be obliged to start paying all the interest on its debt in cash.