Eurotunnel, the financially crippled operator of the undersea rail link to France, yesterday narrowly won the backing of its creditors for a major restructuring. However, rebel debt-holders vowed to fight the result in the courts.
Out of the 53 creditors holding "senior" and "junior" debt, 28 voted in favour of the debt-for-equity swap, representing 72 per cent of the debt. The company needed at least 27 creditors on board, holding at least 67 per cent of the debt, to secure the deal.
Jacques Gounon, the chairman and chief executive of Eurotunnel, claimed that the narrow margin of victory was actually positive, as it demonstrated the level of pain that creditors will have to bear.
"The result of the ballot demonstrates that the proposed plan is the best balance possible between shareholders and creditors and that it was not possible to ask the creditors, who have already agreed to reduce Eurotunnel's debt by more than half, to go any further," M. Gounon said.
Under the company's plan, creditors and shareholders have to surrender some of their interests to allow Eurotunnel to have a more manageable debt pile. The proposals will see total debt cut from £6.2bn to £2.8bn, halving the annual interest bill to some £150m.
The senior and junior debt holders, who voted yesterday, hold around £4.3bn of the total debt, with bondholders having £1.9bn. Bondholders, who would end up with just £240m, and shareholders, who would see their stake in the company shrink to just 13 per cent, have yet to vote. Eurotunnel hopes to complete the restructuring by the end of March - unless the courts intervene.
Oaktree Capital Management, the debt-holder which has led the rebellion against the plan, did not attend the meeting of the debtors committee yesterday and it "does not consider the finding as binding on it".
Oaktree, based in the US, claims that its category of debt, known as Tier 3, is not being treated fairly under the restructuring. It is demanding, in a lawsuit filed in Paris, that the Tier 3 holders (who have £1.8bn of debt) be given a separate vote on the restructuring.
"Oaktree will continue to pursue its challenges to this plan, while seeking a fair, balanced and realistic restructuring agreement for all stakeholders," Oaktree, which claims to represent over half of the Tier 3 creditors, said.