Eurotunnel pounds 8bn debt deal close

Outgoing Morton says agreement must serve shareholders' interests
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Eurotunnel, the Channel tunnel operator, is on course to reach agreement on the rescheduling of its pounds 8bn debt mountain by the end of next month, its outgoing chairman, Sir Alastair Morton, said yesterday.

Announcing that he would retire from Eurotunnel around the end of October after nine and half years at the helm, Sir Alastair said that all the conditions were in place for a deal with its 225 creditor banks that would see them convert a large proportion of their borrowings into equity.

"We have led the banking horse to water. It is now up to them to drink," Sir Alastair said. "The pieces are all on the table, what now needs to happen is to complete the negotiations on those pieces but there is very little left to talk about. There are about eight hours of serious negotiation left which is why I have given eight weeks to do it in."

However, Sir Alastair insisted that any agreement would have to serve the interests of Eurotunnel's shareholders. "Nobody is under any illusion that 750,000 investors are going to vote for a solution that wipes them out or deprives them of a fair share of long-term cash flow," he said.

The initial debt-for-equity swap is not expected to leave the banks owning more than 49 per cent of Eurotunnel but it is possible they will be entitled to swap additional debt for convertible bonds which, if exercised, would give them control.

In the event that no agreement is reached, the French courts could start the process of putting Eurotunnel into liquidation. Lord Wakeham and Robert Badinter, the two mandataires ad hoc appointed by the French commercial courts to help negotiate the debt rescheduling, are due to complete their mandate by the end of September and are not expected to be reappointed.

As a sop to shareholders while they await the outcome of the long, drawn- out talks, Eurotunnel has decided to offer some limited additional travel perks consisting of special cheap rates on Eurostar services to Paris and Brussels and discounts on Shuttle fares.

News of progress in the debt rescheduling talks came as Eurotunnel reported a pre-tax loss of pounds 372m for the first six months of the year - a pounds 93m improvement on the same period in 1995. The loss was struck after pounds 330m of interest payments although Eurotunnel has paid little interest since announcing a debt standstill last September.

At the operating level, it made a loss of pounds 27m after depreciation.