Eurotunnel warns of battle for survival

Eurotunnel warned its creditors yesterday that if they do not come to a refinancing deal, the cross-Channel tunnel owner may not have a future beyond this year.

In what analysts saw as an intensification of the game of brinkmanship between Eurotunnel and the holders of its £6.2bn debt mountain, the company said all creditors must come together for the first time "to reach a consensual financial restructuring".

Jacques Gounon, the chairman, said: "Eurotunnel is undergoing a profound reorganisation which is generating a substantial improvement in operational performance. But beyond this positive new dynamism, we can't guarantee the future of the group in 2007, unless there's a global financial restructuring."

In 2007, the company will have to pay all interest in cash and begin to pay down the principal debt. It will be further hampered by the end of a deal, in late 2006, that guarantees it a certain minimum level of income from freight traffic through the tunnel."It's the perfect financial storm," one insider said.

Eurotunnel said it wanted to reach a deal in the next month so that it could put it to shareholders in the summer. The company had started negotiations by asking creditors for forgiveness of debt. More recently it has hinted at a debt-for-equity swap.

A source close to the biggest group of creditors, the Ad Hoc Committee, said: "Our preference is to go for an agreed capital restructuring but that must be based on economic reality and existing legal obligations."

Eurotunnel also announced provisional operating results for 2005 which showed revenues crept up 1 per cent to £541m, while trading profit improved 19 per cent to £153m.