Eurotunnel In Outline Debt Deal

A source familiar with the marathon talks said: "There has been a global agreement, the details are being finalised this evening."

A spokeswoman for heavily indebted Eurotunnel declined comment. But banking sources in London confirmed an outline pact had been reached.

Talks between Eurotunnel co-chairman Alastair Morton and Patrick Ponsolle and the creditor banks dragged on into Tuesday evening as they worked on details of the debt refinancing which is vital for the company's future.

Eurotunnel, which operates the rail tunnel opened in 1994, froze payments to 225 banks on part of its debt in September 1995, unable to bear the loans piled up on its balance sheet and cost overruns incurred digging the Franco-British link.

 

The company has been seeking an agreement on the pricing of an expected debt-for-equity swap and the issue of convertible bonds which would lighten the debt service.

Eurotunnel's Ponsolle and Morton have tried to protect shareholders from a massive dilution of the share capital while the banks, who rank above them as secured lenders, have sought to get as much of the equity as possible in the debt conversion. Stockmarket analysts in London said Eurotunnel neds to cut out around half of the debt mountain if it is to survive.

"There is one billion pounds of equity, $9 billion of debt and $480 million of revenue," said analyst Richard Hannah of investment bank UBS.

Shareholders, at least 600,000 of them in France, have seen at least two-thirds of their investment drain away since they invested in the 1987 flotation at FFr35 per share. The company also issued new shares in 1994 at FFr24.

Banks have received millions in fees and interest payments.

Eurotunnel has been a commercial success, winning a 40 per cent share of the market in the dover-Calais route. But it is bowed under by its debt service burden.

Meanwhile, Eurotunnel's share are suspended until the outcome of the talks. The shares closed on Friday at FFr9.20 francs per share in Paris and 113.5 pence in London.

"There is simply not enough value in the company to satisfy everyone," said a corporate debt specialist.