Eurotunnel's creditors, who are owed £6.4bn by the embattled company, were yesterday seeking urgent meetings with its new management to establish how it plans to cut its mountain of debt.
The group, including British and French banks, appointed the investment bank NM Rothschild to advise them on their options, which include ousting the board members even though they only took their positions on Wednesday evening, and replacing them with a different team.
The banks can exercise their right of substitution if Eurotunnel defaults on its debt repayments. They might also be able to use this right if the company pushes for a renegotiation of the terms of the repayments.
However, sources close to the situation emphasised that the banks would not rush to exercise the right because it would bring further turmoil to the company, which saw its original set of directors removed by a sensational vote by shareholders at the annual meeting in Paris on Wednesday.
A source close to the banks, who have appointed a steering group to co-ordinate their strategy, said: "We expect the company to appoint their own advisers in the next few days and after that we would be ready to engage."
Hervé Huas, a former JP Morgan banker who has been appointed Eurotunnel's finance director, tried to bolster confidence among the financial community. He told a meeting for the company's British shareholders yesterday at the Queen Elizabeth II Conference Centre in London that "rights issues, convertibles are all possibilities".
M. Huas also said that elements of the rescue plan put together by the previous management, known as Project Galaxie, could be used. The statements could be seen as a significant shifting of ground after the group of rebel shareholders, led by Nicolas Miguet, who defeated the old board and picked the new one, were highly critical of Project Galaxie.
M. Huas, and Eurotunnel's new chief executive, Jean-Louis Raymond, hope to persuade the banks to restructure the debt repayments, as there have already been discussions about how this could be done. However, the banks will demand to see a detailed forecast about how the directors plan to boost revenues in a new three-year plan that the company has to give to creditors no later than October.
While the new management appears to be striking a more moderate line than their supporters did in the run-up to deposing the old board, some banks said they remained very cautious about their strategy.
One source said: "You could sit in a room with the old management and you might have fiery arguments but at least you were all talking the same language and you could understand each other. There is not necessarily that confidence based on public utterances [with the new board]."
M. Miguet, a share tipster and journalist who led an aggressive campaign against Eurotunnel's former chief executive, Richard Shirrefs, dismissed the threat of new board being rejected by the banks, saying the substitution right was "a ghost, not a reality".
"I saw a lot of banks who are creditors a few months ago and they said they wanted to discuss the matter, and did not want to run the tunnel," he said.
Several of the British banks which backed the original plan to finance the building of the Channel Tunnel have reduced their stakes in recent months. NatWest, now part of Royal Bank of Scotland, was one of five lead banks that provided £5bn for the project in 1987. It also participated in a refinancing three years later and provided more cash in 1994. HSBC also recently cut its exposure to Eurotunnel.
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