Eurotunnel sees off liquidation threat as investors back rescue

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The Independent Online
Eurotunnel last night escaped the threat of liquidation after a stormy shareholders' meeting in Paris voted to back a controversial debt restructuring deal that will give its banks a controlling stake in the Channel Tunnel. The marathon meeting, attended by more than 1,700 shareholders, gave the Eurotunnel board a rough and raucous ride, at times drowning out the chairman, Patrick Ponsolle, with chants of "Ponsolle out".

But at the end of the seven-hour encounter at the Palais des Congres on the outskirts of the French capital, the plan to reschedule Eurotunnel's pounds 9bn debt mountain through a debt- for-equity swap, and in the process give the banks a 60 per cent stake in the tunnel, was safely approved.

Eurotunnel needed 25 per cent of its shareholdings to be represented for the meeting to go ahead and then it required the support of 75 per cent of the votes cast to get the restructuring approved. In the event 78,254 of Eurotunnel's 720,000 long-suffering shareholders owning 272.5 million shares, or 29.62 per cent of the company, were represented.

Mr Ponsolle arrived at the meeting with 178 million proxies in his back pocket, making victory for the board an odds-on bet. Shareholder action groups speaking for a further 3 per cent of the equity had also pledged to vote their proxies in his favour. But that did not stop irate shareholders from giving him a rough ride, their irritability made all the worse by the stifling heat and lack of refreshments - a stark contrast with the traditional British agm.

Mr Ponsolle and the rest of the board faced repeated attacks on their integrity, motives, and trustworthiness for "selling out" to Eurotunnel's banks. One shareholder summed up the feeling of a vocal and vociferous minority by declaring: "Lower your Fr2 million [pounds 200,000] salary, then we will follow you. Otherwise we cannot trust you."

Another shareholder caught the ribald mood of the meeting by saying he had no intention of disposing of his 100 Eurotunnel shares because its annual meetings were the most entertaining show in town: "This year's is the best we have had. Nobody has bitten anyone's ear off yet but it may happen."

Eurotunnel will swap pounds 4.7bn of its debts for equity and loan notes, giving the banks an initial 45.5 per cent stake in the tunnel. This will rise to just over 60 per cent when the equity notes convert into Eurotunnel units but existing shareholders could in theory retain majority control over the tunnel by exercising in full two sets of warrants being issued.

Eurotunnel's hopes of getting shareholder approval for the refinancing improved markedly last month after the British and French governments agreed to extend its concession to at least 99 years. The approval was conditional on the debt restructuring plan being passed by both Eurotunnel's shareholders and its banking syndicate, which will vote on the deal in autumn.

In return for extending the concession from 2052 to 2086, the two governments will take a share in revenues generated over that period. Eurotunnel must also undertake to maximise the use of the tunnel by rail freight as part of a wider European initiative to get freight of the roads and onto trains.

The prospectus for the refinancing forecast that Eurotunnel could break into profit in 2005 and start paying a dividend in 2006. It also produced an upper case forecast, projecting profits of pounds 110m in 2005 provided it had secured an extension to its concession.

The approval of all 174 banks making up the loan syndicate is still needed for the restructuring to proceed. This is expected to take until autumn. But Eurotunnel's prospects of getting the backing of the syndicate have increased since it emerged in May that a handful of big US banks, led by Lazard Freres, have acquired nearly a quarter of Eurotunnel's debt.

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