Creditors step up Eurotunnel battle

The stand-off between Eurotunnel and some key creditors escalated yesterday after the US hedge fund Oaktree placed an advertisement in the French press condemning the company's restructuring plan and proposing an alternative that would leave shareholders with just 5 per cent of the company.

Franklin Mutual Advisers, another major creditor, is also understood to be against the plan to refinance Eurotunnel's £6.2bn of debt. Between them, Oaktree Capital Management and Frank-lin account for over 20 per cent of the company's senior debt of £4.2bn.

Creditors will vote on the plan later this month, with Eurotunnel requiring the support of two-thirds of its debt-holders to get its proposals through. Yesterday, a Eurotunnel spokesman said: "Oaktree are trying to negotiate this up to the wire. They don't understand the French system. They don't understand that negotiations are now complete."

Under the Eurotunnel plan, debt will be cut by more than half, giving creditors up to 87 per cent of the equity in the new Eurotunnel company. Oaktree, which took an advertisement in Les Echos, the French business newspaper, wants creditors to receive some 95 per cent of the equity. The hedge fund has also filed a lawsuit.

It is not clear how much of the ad hoc committee of creditors, of which Oaktree is a part and which represents around half of all Eurotunnel debt, is against the company's proposals.

Founded in 1986, Eurotunnel ran up massive debts during construction of the Channel Tunnel, which opened in 1994. Its business plan got into difficulties when passenger numbers failed to meet its projections and it was placed under the French version of Chapter 11 at the start of August. Last month, it filed a debt restructuring proposal with the Paris Commercial Court to be put to creditors.