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
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Day In a Page

Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most
Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

No grace of God for Katy Perry as sisters act to stop her buying convent

Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

Residents just want water and power in a city chosen to be a ‘smart’ metropolis

The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

Something wicked?

Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
10 best sun creams for body

10 best sun creams for body

Make sure you’re protected from head to toe in the heatwave
Wimbledon 2015: Nick Bollettieri - Milos Raonic has ability to get to the top but he must learn to handle pressure in big games

Nick Bollettieri's Wimbledon files

Milos Raonic has ability to get to the top but he must learn to handle pressure in big games
Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

There is more than a shiny trophy to be won by England’s World Cup women

The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with cynicism and greed
How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map