Eurotunnel `may never repay debts'

Sir Alastair Morton, co-chairman of Eurotunnel, has told banks they must slash the interest rates and fees they charge on the tunnel's pounds 9bn of loans.

Announcing losses last year of pounds 925m, Sir Alastair said yesterday that Eurotunnel had warned the banks that the company may never be able to repay its debts during the entire 57 years left for its concession.

The company said it had told the banks and the two mediators appointed by the French courts that negotiations "should not be based on any assumptions that cash flows over the life of the concession will necessarily be sufficient to repay the banks their principal plus interest, at the levels currently in the credit agreements, plus interest and penalties payable thereon."

Sir Alastair made clear that the comment was aimed principally at persuading the banks to cut their profit margins.

Eurotunnel currently pays its banks a margin of more than 1.6 percentage points above the standard London interbank interest rates on its debts.

Sir Alastair said this margin was appropriate for a project in its construction phase but not for one that is complete and has 57 revenue-earning years ahead. He called this one of the main sticking points with the banks. "Nobody should plan to get project financing rates for the next 57 years" he added.

Eurotunnel, which yesterday replaced SBC Warburg with Kleinwort Benson as its UK broker, also pays substantial fees to its 225 banks. These included pounds 45m in the fourth quarter of last year as a result of the suspension of payment of interest on pounds 8.1bn of the pounds 9bn debts.

Sir Alastair insisted that there would still be equity left for shareholders once the debt restructuring with the banks was completed.

A shutdown or receivership did neither the banks nor Eurotunnel any good. Refusing to discuss the negotiations with the banks in any detail before the annual meeting in June, he said: "One thing we won't do is swap debt into equity and go away." However, he conceded that a debt-for-equity swap could form a part of a more complex package.

Sir Alastair repeated his claims that the Anglo-French nature of the company - two-thirds of whose shares are owned in France - gave special protection under French law to shareholders. He said: "Shareholders have to vote on any solution other than a shutdown and the process of moving towards that vote is overseen on an informal basis by the mandataires ad hoc."

These are two court appointees, Lord Wakeham, chairman of the Press Complaints Commission, and Robert Badinter, former French Minister of Justice.

To rub home the point against the banks that this is not an ordinary corporate rescue, Sir Alastair said: "An Anglo-Saxon shutdown and sell- off just does not do them any good in this case."

He believed that when an outline deal was reached with the 26 lead banks - which is unlikely before the autumn - "there is going to be something for the banks and something for the shareholders or there is not going to be a deal - and everybody wants a deal."

Although the shares slipped 4p to 69p yesterday, Sir Alastair insisted that the pounds 925m loss was no surprise, and was foreseeable from the numbers the company had given at the interim results in the autumn.

Last year, after bank fees of pounds 60m and depreciation of pounds 136m Eurotunnel lost pounds 200m before interest. The pounds 925m overall loss was reached after interest charges of pounds 768m, of which pounds 118m is a charge for bank interest unpaid since the standstill on 14 September.

Comment, page 19

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Account Manager / Membership Manager

£35 - 38k + Benefits & Bonus: Guru Careers: We are seeking an Account Manager ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

Guru Careers: Associate Director

£50 - 80k: Guru Careers: We are seeking an Associate Director for the Markets ...

Guru Careers: Associate Director / Director of Sound Practices

£60 - 100k: Guru Careers: Our client is looking for an Associate Director of S...

Day In a Page

Giants Club: After wholesale butchery of Idi Amin's regime, Uganda’s giants flourish once again

Uganda's giants are flourishing once again

After the wholesale butchery of Idi Amin's regime, elephant populations are finally recovering
The London: After 350 years, the riddle of Britain's exploding fleet is finally solved

After 350 years, the riddle of Britain's exploding fleet is finally solved

Archaeologists will recover a crucial item from the wreck of the London which could help shed more light on what happened in the vessel's final seconds
Airbus has patented a jet that could fly from London to New York in one hour

Airbus has patented a jet that could fly from London to New York in one hour

The invention involves turbojets and ramjets - a type of jet engine - and a rocket motor
10 best sun creams for kids

10 best sun creams for kids

Protect delicate and sensitive skin with products specially formulated for little ones
Tate Sensorium: New exhibition at Tate Britain invites art lovers to taste, smell and hear art

Tate Sensorium

New exhibition at Tate Britain invites art lovers to taste, smell and hear art
Ashes 2015: Nice guy Steven Finn is making up for lost time – and quickly

Nice guy Finn is making up for lost time – and quickly

He was man-of-the-match in the third Test following his recall to the England side
Ashes 2015: Remember Ashton Agar? The No 11 that nearly toppled England

Remember Ashton Agar?

The No 11 that nearly toppled England
Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks