AXA joins move to stave off Eurotunnel bankruptcy

The debt-laden operator of the Channel Tunnel also revealed yesterday it was in talks with a further British financial institution about joining the underwriting group, alongside Goldman Sachs, Macquarie Bank and two hedge funds.

Under the financial rescue plan agreed by the Eurotunnel chairman, Jacques Gounon, the Anglo-French group would be able to write off more than half of its crippling £6.2bn of debts.

The proposal has, however, drawn heavy criticism from a group of bondholders holding roughly £1.9bn of Eurotunnel debt at face value. They accuse the company's management of effectively selling the business by the back door.

Under the terms of the deal, Eurotunnel shareholders could be diluted to 13 per cent in five years, while the rebellious bondholders, whose debt trades at about 20p in the pound, have been offered just £75m.

The financial institutions, which are mainly British, funding Eurotunnel's mountain of debt are pitched against the group's French management and shareholders, and the investment banks and hedge funds that stand to inherit the business.

M. Gounon has been locked in talks with Deutsche Bank this week about possible amendments to the programme he presented last month. Unhappy bondholders favour a fresh deal with Deutsche over the plan on the table because, they say, it would save them from writing off most of their loans to the company.

It is understood Deutsche and Eurotunnel have so far discussed only amendments to the existing plan, and not any entirely new proposal involving a substantial equity issuance as reported elsewhere earlier this week.

Eurotunnel will place only one debt-restructuring blueprint before shareholders at its annual meeting on 27 July.

The cross-Channel enterprise was launched in 1973 by the then Prime Minister Edward Heath and Georges Pompidou, the French president. In 1986, Margaret Thatcher and François Mitterrand named Eurotunnel as its operator.

But Eurotunnel struggled to recoup its initial outlay, bolstered by runaway construction costs, amid tough cross-Channel competition. Its shares are suspended pending the outcome of the restructuring.