Eurotunnel to tap investors in €900m rights issue

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The Independent Online

Eurotunnel will announce a €900m (£700m) rights issue today that it hopes will be the last piece of the massive financial restructuring at the long-stricken Channel Tunnel operator.

Shares in the company were frozen yesterday by the AMF, the French markets regulator, in anticipation of what the company said was an "important" announcement. A company spokesman declined to comment, but Eurotunnel is understood to be putting the final touches on the operation designed to buy out holders of convertible loans that, if allowed to be turned into shares, would severely dilute the company's current investors.

The rights issue, prepared by Lazard, is expected to be offered at a deep discount. It will come on the heels of an €800m offering of deferred shares last month that allowed Eurotunnel to buy out more than half of its €1.6bn in convertible notes. Today's operation will allow it to cancel the rest and avoid paying the interest, which is set at a punitive rate.

If successful, the deal would leave shareholders in the original entity, ranging from financial institutions to small shareholders who first bought into the company in the 1980s, holding between 30 and 45 per cent of the company. It is likely to be discounted by as much as 25 per cent, which is about the same rate that was offered on the deferred rights issue last month. Goldman Sachs took up most of that offer, buying rights that can ultimately be converted into a 15 per cent stake in the company.

Before its shares were suspended yesterday, they were trading at €12. It is thought Eurotunnel could offer investors a warrant with each new share that would give them a still deeper discount.

The deal would also be the last bit of financial housekeeping after the company's massive restructuring that saw it wipe out more than €5bn worth of debt, reducing its total outstanding to €4bn.

Coming at a difficult time in the credit and stock markets, the offering is nonetheless expected to be well-received. Its chief executive, Jacques Gounon, had already informed the market of the plan, and Eurotunnel is healthier now than at any point in its history. This month, it published its first annual profit of €1.5m.

M. Gounon also pledged to issue a dividend next year, another novelty for a company that has spent most of its existence fighting off creditors.