Eurotunnel Prunes First-Half Loss, Sees Early Debt Recast

Losses after interest totalled FFr3.04 billion ($597 million), an improvement of FFr618 million on the same period in 1995. Since March, Eurotunnel had broken even at the operating level before financial charges and after operating expenses and capital expenditure.

French co-chairman Patrick Ponsolle said this proved it was economically viable but needed to lighten the debt burden.

But the British and French co-chairmen differed over the timing of the deal which would refinance FFr72 billion of debt and unpaid interest owed to its 225-strong bank syndicate. Eurotunnel has been in bank talks since it froze payments on its junior-ranked loans a year ago, after it undershot cash targets in 1995. A mandate for two mediators named by a Paris court to help negotiations expires at the end of September.

 

Ponsolle told reporters here he still hoped for an agreement by the end of September, while his British counterpart, Alistair Morton, said in London he was allowing eight weeks to reach an accord with bankers.

Our aim is still to reach an agreement on September 30, Ponsolle told reporters. He said there was a near-consensus on the instruments and the structure for the debt-restructuring. But the key question of sharing out the rewards remained.

What is still being discussed is the division of pain and the hope of gains between shareholders and lenders, he said. The talks were difficult and complex, he added. Morton said: I reckon there's about eight hours of serious negotiation left to do, so I've allowed eight weeks for it. The banks have got plenty of time to get their act together and come to the table, he said in a telephone interview.

Morton, who has said he would resign when the debt talks were over, announced he will step down around end October. Eurotunnel's talks have been deadlocked over how much banks should get out of cashflow to repay debts and the amount that should go to shareholders who have seen their shares plummet.Ponsolle said

Eurotunnel had always been sold as a long-term investment - it was floated in 1987 and the first dividend was planned for 2004 - and it would be unfair if the banks were get the rewards just as it started making money.

Eurotunnel had decided to reward shareholders' patience with discounts on the company's Le Shuttle trains and the Eurostar high-speed rail system, he said.

Stockholders could get 30 per cent discounts for three return journeys a year on Le Shuttle and reduced fares on Eurostar.

Eurotunnel was on track for a 50 per cent sales increase this year, on its 1995 turnover of FFr2,266 million, despite an expected slowing in sales in the second half of 1996, he said.

The company has provisioned FFr3,710 million for interest due on its bank debt but unpaid since it froze payments on September 14, 1995. Its cash position had doubled to FFr440 million from a year ago.

It announced August traffic on the Le Shuttle doubled to 304,032 vehicles compared to 145,861 a year ago. Eurostar carried 566,247 people in August, compared to 279,449.

Ponsolle said a decision on its claim against the TransManche Link building consortium could be made early in 1997. The earliest date a shareholders meeting could be convened to vote on a debt accord would also be in the new year.

Morton will be succeeded by Robert Malpas, chairman of Cookson, a British specialist materials manufacturer.