Last chance for Eurotunnel with creditor vote on a knife-edge

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The Independent Online

Eurotunnel executives will this morning launch a last-ditch attempt to persuade creditors to back a restructuring plan that represents the Anglo-French company's final chance to avoid liquidation.

The company's 53 creditors will vote in Paris on proposals from Jacques Gounon, the chief executive, to write off half of Eurotunnel's £6.2bn of debt. They have been asked to accept a deal in which their lending would be converted into new loans worth £2.8bn and convertible bonds worth a further £1.275bn.

Eurotunnel's senior management has spent the weekend campaigning for a yes vote, arguing that the Paris Commercial Court has already assessed the company's liquidation value as just £890m. The company pointed out yesterday that most creditors would be substantially worse off with a share of an asset pool of this reduced size. It also said it had agreements in place with two backers, a consortium of Goldman Sachs and Deutsche Bank, and Citigroup, to underwrite the restructuring.

However, it remains unclear whether a sufficient number of creditors have been persuaded to back the deal, which would enable Eurotunnel to move out of French bankruptcy protection, for which it applied earlier this year. A spokesman for Eurotunnel yesterday admitted the vote remained "too close to call".

The main difficulty is that while the company is confident that it has won the backing of two of its largest creditors, MBIA and the European Investment Bank, this may not be enough, even though the two between them hold more than half the outstanding Eurotunnel debt.

In addition, the company must secure the support of 27 of its 53 creditors at the Paris vote. Lenders that fail to cast their vote will be counted as having voted against the deal, and there are fears a boycott of the ballot could scupper the refinancing.

The turnout from "tier three" creditors, who have most to lose under Eurotunnel's proposals, is particularly uncertain. One such creditor, the US investor Oaktree Capital Management, has already indicated it will not attend the vote, amid a legal dispute about how creditors should be consulted.

A second US creditor, Franklin Mutual Advisors, has also warned it will not vote in Paris, and there are concerns that several other US debt holders may not attend because the vote comes so soon after Thursday's Thanksgiving holiday in America.

If Eurotunnel is eventually forced into liquidation, it is almost certain that the tunnel itself would remain open, with existing users such as Eurostar continuing to serve customers. One option would be for the British and French governments to take back their stakes in the project and appoint a new operator to run it.