Eurotunnel escape plan falters as American creditors rebel

A rescue plan designed to safeguard the future of Eurotunnel, the beleaguered operator of the Channel Tunnel, is set to be derailed by a group of the company's creditors.

It is believed that US-based Franklin Mutual will vote against a plan to be put forward by Eurotunnel, which would have seen the company's bondholders ending up owning 87 per cent of the group's equity.

Franklin Mutual is understood to have sided with the rebel group led by Oaktree Capital and other creditors who intend to vote against the safeguard plan that the company had hoped would allow it to emerge from bankruptcy protection in France.

Opposition from the rebels, who together hold more than 50 per cent of Eurotunnel's debt, would make it impossible for the company to proceed with its plan. Eurotunnel's chief executive, Jacques Gounon, has said repeatedly that the proposal to restructure the company's £6.2bn debt had the support of the majority of its creditors.

If the vote fails, the company could be forced into administration and eventual collapse.

A spokesman for Eurotunnel said: "Statistics show that 95 per cent of those cases that go to administration end in liquidation." Franklin had not contacted Eurotunnel to make it aware of its intentions, he added.

If Eurotunnel were liquidated, the concession would be given back to the French government, which would then have to choose a new company to run the high-speed rail link.

Under the proposal on the table, Eurotunnel shareholders would end up with 13 per cent of the company, while the bondholders would get an undisclosed amount of cash plus most of a £1.3bn note that could be converted into an 87 per cent equity stake in a new company.

Oaktree and Franklin are understood to want to continue negotiating in the hope of securing a better agreement. Under French restructuring law, however, that is no longer an option.

The Eurotunnel spokesman said: "There is no further room under the law for negotiation to take place."

Under French law, a company that files for the safeguard procedure has a two-month window to come up with a plan; this is then voted on by its investors.

"There seems to be some confusion among the creditors about this. Once the plan is presented it means that the negotiation is over," the spokesman added.