Pressure mounts on Eurotunnel banks

Eurotunnel will miss the latest deadline for restructuring of its pounds 8.5bn debt tomorrow, increasing the pressure on its 225 banks from the French courts to reach an agreement with the Channel Tunnel operator, writes Paul Farrelly.

The mandate of court-appointed mediators, former Conservative minister Lord Wakeham and French politician Robert Badinter, will expire tomorrow as banks continue to haggle over rescue terms.

Jean-Pierre Mattei, president of the Paris commercial court, has decided not to renew their mandate, which has already been extended once since their appointment in February.

Siding with Eurotunnel's 750,000 French investors, Mr Mattei has already warned of the dangers of sliding towards the quagmire of conflicting French and UK insolvency law and emergency provisions of the 1987 Channel Tunnel Treaty.

"Both mandataires will be reporting to the president on progress. He is now likely to be tougher than them in solving the problem," a Eurotunnel source said this weekend.

In a framework brokered so far, both sides are negotiating a two-stage deal, involving a pounds 1bn to pounds 2bn debt-for-equity swap and a convertible bond to refinance up to pounds 2bn more. That would leave the banks with around 49 per cent of the equity immediately, rising to more than 75 per cent through the convertibles. But there is still deadlock on crucial details.

Eurotunnel unilaterally suspended interest payments for 18 months last September, and Mr Mattei has already called for an extension to next March's deadline.

Co-chairman Sir Alastair Morton said at the interim results two weeks ago that he hoped for a deal by the end of October, when he is due to step down.

Sir Alastair has riled the banks with his pugnacious approach, however, and they may be keen to delay a deal until after he goes to leave him with a bitter epitaph.

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