A French court has granted Eurotunnel's request for bankruptcy protection, giving the firm a six-month breathing space from debt repayments.
Eurotunnel's chief says he still hopes to find a deal with creditors
The court verdict comes after the Channel Tunnel operator failed to reach a deal with creditors to reduce its debt mountain of £6.2bn ($11.5bn).
The protection means creditors opposed to Eurotunnel's debt plan will find it harder to block the restructuring.
Some creditors say Eurotunnel's plans would lose them too much money.
Despite its severe financial problems, Eurotunnel has insisted that it will continue to maintain services between the UK and the Continent.
The French court will still try to broker a deal between the two sides but does not have the power to force creditors or shareholders to accept it.
'Confident of success'
Eurotunnel boss Jacques Gounon said he still hoped to secure a deal with creditors.
"I am convinced that we will succeed in finding a final solution during the [six-month] observation period," he said.
"All the creditors and the company are organised to avoid such a crisis."
Eurotunnel is benefiting from a safeguard procedure, similar to US Chapter 11 bankruptcy law, which was introduced in France at the beginning of the year to help companies avoid declaring bankruptcy.
The firm has earlier warned that without the court backing its request for protection, bankruptcy is a real risk.
Eurotunnel shouldered massive debts in order to dig the cross-channel rail tunnel, which opened in 1994.
Yet its business plan quickly got into difficulties when actual passenger numbers were greatly below its projections.