Losers in Eurotunnel restructuring plan draw up deal
The holders of nearly £2bn (€2.9bn) of debt in Eurotunnel are drawing up a rival restructuring plan for the troubled group, it was reported today.
So-called junior bondholders are working on their own refinancing scheme for the company’s £6.2bn (€9bn) debt mountain put together by Deutsche Bank, which is believed to be the main holder of the lowest tier of debt, according to Sunday newspaper reports.
They are understood to have sent a letter to Eurotunnel chairman Jacques Gounon on Friday saying they reject his proposal and are prepared to replace him with their own candidate as part of a rival plan, which is thought to include a new business plan for the Channel Tunnel.
Eurotunnel announced plans last week to slash its £6.2bn (€9bn) debt to £2.9bn (€4.2bn) through a refinancing deal backed by Goldman Sachs, Barclays and Australian bank Macquarie.
It hinges on the creation of a new company, to be listed in Paris and London, which would be the vehicle for the restructuring.
But shareholders will see their holdings in the new company diluted to just 13% if the move goes through.
The junior bondholders are set to be among the biggest losers in the proposed restructuring, being offered only £75m (€109.3m) for loans with a face value of £1.9bn (€2.8bn), although the bonds actually trade at a significant discount to this.
They have criticised the package as being a “cheap management buyout” that undervalues the company.
Neither Eurotunnel nor the group of junior bondholders could be contacted to comment.
The Sunday Telegraph quoted a spokesman from Arco, which represents the bondholders, as saying on Friday: “We are sending a letter to Gounon this evening saying that we reject the proposal and that we are going to prepare an alternative.
“It will be a better proposal for shareholders. They will not see their equity diluted so much.”
Citigroup is understood to be drawing up plans for a third refinancing package, under which it is reported to be prepared to underwrite £3.5bn (€5.1bn) of new investment and debt, while leaving shareholders in control of the group.
Meanwhile, The Sunday Times reported Mr Gounon as saying he would be prepared to use the UK courts to push through restructuring plans if the company could not strike a deal with the rebellious bondholders.
He said he would be prepared to use a so-called scheme of arrangement, under which company takeovers are quickly approved or rejected by the High Court, to push the plans through.
The board’s proposal, which has been 10 months in the making, will be put before shareholders at the company’s annual meeting on July 12.
Eurotunnel has repeatedly warned that without a debt overhaul it would not be able to guarantee the future of the group beyond 2007, the point at which it is due to start paying back a significant portion of the debt.
Shares in Eurotunnel are currently suspended in London and Paris while the company attempts to sort out its future.
