pounds 700m down the Tunnel

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The Independent Online
Eurotunnel is braced for a renewed outbreak of militancy among its long-suffering shareholders when it announces its results for 1996 on Thursday.

The event will be overshadowed by news on the restructuring agreement between the company and its 225 banks, subject to repeated delays, and by a crucial safety report on the aftermath of last November's tunnel fire.

The shareholders, whose leaders claim to have been "kept in the dark" on both issues, will use any bad news to renew their demands for French bankruptcy proceedings to be instituted against the company.

"We have not been told very much about the restructuring package, but from what we know it is totally unacceptable. If anything, the situation has got worse since the fire," said Georges Berlioz, the Paris-based barrister at the head of Adacte, a shareholder activist group that claims to speak for around 15 per cent of the equity.

Analysts expect the company will unveil losses of about pounds 700m on Thursday, partly as a result of business lost in the wake of the fire. The shares, which have fallen by 37 per cent since October, closed at 69.5p on Friday. The company will offer more details on progress in restructuring its pounds 9bn- plus debt.

Eurotunnel hopes that the Cross Channel Safety Authority, which is preparing the safety report, will not force it to enclose the truck-carrying open- freight trains, a step urged by safety experts in the wake of the fire. Eurotunnel cannot run these trains until the Safety Authority is satisfied with new procedures.

Enclosing the cars would cost about pounds 100m - a trifle compared to the billions of debt. But Jeff Summers, an analyst at Klesch & Co, which trades the debt of distressed companies, said such a major design change could make the freight trains heavier, meaning Eurotunnel could carry less traffic, thus hurting its revenue stream. "The banks will have to rethink whether this restructuring is the best thing," he said.

The bleak prospects for the company, which will still carry around pounds 5bn of debt after the restructuring, may also persuade shareholders to derail the process when they are asked to approve the restructuring in September and hope for a better deal from the French bankruptcy courts. Any bankruptcy proceeding would have to negotiate a minefield of conflicting French and British insolvency law, and would cause severe political headaches.

"The company assumes the shareholders will just wave through the restructuring package. But we are fully prepared to vote it down," said Mr Berlioz.

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