Eurotunnel's bankers are considering converting up to pounds 1bn of debt into equity as a partial solution to the Channel tunnel operator's financial crisis.
The company's 630,000 shareholders have long feared a debt swap, which would dilute the already diminishing value of their investment.
Last month Eurotunnel suspended interest payments of pounds 2m a day on junior debt for up to 18 months, a move that took many of the company's 225 banks by surprise.
Now there is a suggestion that the accrued interest of pounds 1.09bn be swapped for equity as a prelude to a more substantial refinancing. "The banks would like an interim solution to stabilise the situation," said a source. "Dealing with the interest first will buy time to organise a full refinancing later."
Two weeks ago, the Independent learned that the four agent banks had written to the banking syndicate telling it of the need for shareholders to take more of the pain caused by Eurotunnel's crisis.
The clear implication was that the shareholders' investment would have to be diluted, perhaps by a debt for equity swap that could wipe out the value of the shares which are held mainly by French investors.
A Eurotunnel shareholders' action group, based in Paris, recently claimed that about pounds 14bn had been wiped off the value of their holding since the company went public.
Several analysts believe a debt for equity swap of up to pounds 3bn is necessary. Gary Klesch, the debt trader, said recently that such a move would be needed by early 1998.
A spokesman for the agent banks - the UK's National Westminster and Midland, Credit Lyonnais and BNP in France - would not confirm the interest payment debt swap. "We have not fully dismissed any solution or way forward. But nothing has been agreed," he said.
The urgent need to resolve the company's financing was underlined yesterday when the giant US investment group, Capital, again cut its stake in Eurotunnel to 6.38 per cent. At the end of last month Capital reduced its holding to 7.11 per cent.
Meanwhile, figures out yesterday showed that the number of tourists taking cars through the Channel tunnel last month fell compared with the busy holiday month of August, but freight traffic has increased.
Cars travelling on the Folkestone-Calais Le Shuttle trains totalled 105,914 in September - a fall of nearly 40,000 on the 145,861 figure for August.
But coaches using the shuttles rose from 2,728 in August to 3,033 last month, while the number of Le Shuttle freight lorries increased from 36,517 in August to 38,136 last month, reported Eurotunnel.
The company also said that the number of through-freight trains travelling through the tunnel increased from 425 in August to 515 in September.
There was also an increase in the number of Eurostar trains which operate from London's Waterloo station through the tunnel to Paris and Brussels. With frequencies increasing, from 24 September, Eurostar ran a total of 862 trains in September, against 844 in August.
At rival P&O, freight truck crossings rose to 55,604 from 46,116, while its equivalent tourist vehicle figure slipped to 136,202 from 185,950. Richard Hannah, analyst at UBS, said Eurotunnel's figures were "more or less in line with the market, which is a bit disappointing for Eurotunnel really".