Eurotunnel handed legal reprieve
Eurotunnel has said the decision to allow it creditor protection will help it avoid liquidation and deal with its $11.5billion worth of debt.
A Paris court granted the channel tunnel operator a six-month reprieve on interest payments on its debts on Thursday.
The massive debts were caused by huge cost over-runs during the construction of the under-sea rail link between France and Britain.
On leaving court, Jacques Gounon, the Eurotunnel chief executive, said the way was now open for a swift resolution to deadlocked talks with creditors to cut the debt.
“Negotiations should result in a satisfactory proposition quite quickly.”
‘Convergence’
Eurotunnel made the court application in mid-July after two days of talks with creditors failed to produce a deal.
Since then, informal negotiations have also failed, but Eurotunnel signalled on Wednesday that there had been “convergence” among its creditors on a possible solution.
Gounon said that the risk of liquidation, which was now “unlikely in all probability”.
Eurotunnel had sought a deal with creditors to halve its debt and thus avoid bankruptcy.
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It is forecast to run out of cash early next year when it is scheduled to begin repaying the capital of its debt as well as interest charges.
The court decision gives Eurotunnel six months of shelter under a new French safeguard procedure, similar to chapter 11 bankruptcy law in the US, designed to help companies avoid bankruptcy.
It was the first time the safeguard measure has been used in France for such a high-profile company.
Mounting debts
Also on Wednesday, small shareholders, who have seen the price of Eurotunnel shares tumble since their launch in 1987, appealed to Jacques Chirac, the French president, for help in finding a solution.
Eurotunnel amassed its enormous debt during the construction of the channel tunnel rail link, which was built in the 1980s and 1990s without public financing at the insistence of Margaret Thatcher, the then British prime minister.
The cost of the project, initially estimated at 7.32billion euros, nearly doubled to 13.72billon euros, largely owing to additional security norms imposed on the company and technical difficulties.
Many expert observers say that whatever the outcome of the debt negotiations it is unlikely that the tunnel would cease operating.