Eurotunnel directors warn rebel investors

Eurotunnel's independent directors banded together yesterday to warn that investors could lose everything if a rebel group of French shareholders succeeds in ousting the management and instituting their own financial rescue plan for the Channel Tunnel.

The nine non-executives, who include the chief executive of Virgin Trains, Chris Green and the managing director of Arsenal football club, Keith Edelman, said the "so-called solutions" put forward by the rebels were "unrealistic and dangerous".

In an open letter to Eurotunnel's one million shareholders the directors added: "Moreover, they run a severe risk of leading the company into an extremely difficult situation which could well result in shareholders losing their entire investment." Eurotunnel shareholders will vote on the rebels' proposals at a special meeting in Paris on 7 April. The rebels, led by a sometime right-wing politician and share tipster Nicolas Miguet, are calling for the removal of the existing board and its replacement by eight new French directors.

Their restructuring plan envisages forcing banks to write off up to three-quarters of its £6bn in debts and doubling access charges levied on Eurostar and operators of freight trains.

The independent directors - four British and five French - said these proposals are "totally unrealistic" and urged investors to reject them and instead endorse the plan - the Galaxie Project - unveiled this month by Richard Shirrefs, Eurotunnel's chief executive. It envisages a substantial cut in access charges to stimulate more traffic through the tunnel in return for help in cutting the debt mountain, perhaps by the train operators taking an equity stake in Eurotunnel. The Anglo-French company is in danger of going bust in 2006 when a standstill agreement that enables the company to substitute interest payments to its banks with financial instruments that convert into shares expires.

Eurotunnel announced last month a record loss of £1.334bn for last year after taking a £1.3bn write-down in the value of the tunnel to reflect lower traffic volumes. But even excluding this huge one-off item, it still made a net loss of £34m.

Although Eurostar is effectively state-owned through its parent companies, SNCF and London & Continental Railways, the developer of the high-speed Channel Tunnel Rail Link, the UK government has ruled out putting taxpayers' money into the tunnel.

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