Eurotunnel calls on the courts

RUSSELL HOTTEN

Eurotunnel is next week expected to announce plans to ask the French courts to appoint a senior businessman to help mediate with its 225 banks.

Negotiations over the Channel Tunnel operator's pounds 8bn of debts are deadlocked because many smaller creditors want to take a hard line with Eurotunnel.

The Anglo-French company's board met in London yesterday under co-chairman Sir Alastair Morton and was planning to announce the move early next week, along with a progress report on the talks.

Eurotunnel will apply to the courts for the appointment of a mandataire ad hoc, but the company can recommend a list of names for approval. The nearest English legal equivalent is amicus curiae, or friend of court.

The appointment of a conciliator is the first stage of French pre-insolvency law, although there appears little evidence that the majority of Eurotunnel's banks want to force it into bankruptcy.

A conciliator, whom one source said would be drawn from the "good and great of the business world", would have greater powers to force the banks to reach an agreement.

Under French law a conciliator is an independent person who takes an active part in debt negotiations and draws up a restructuring plan which, if approved by the court, has binding powers.

An agreement on the terms of Eurotunnel's restructuring must receive 100 per cent approval from the banks, which is why it has so far proved difficult to reach unanimity.

Next month the banks can vote on whether Eurotunnel's suspension of interest payments for 18 months, announced last year, should be allowed to continue.

Creditors wishing to overturn the suspension would need to amass 65 per cent of the vote by value of their exposure, an amount that is unlikely to be achieved.

Meanwhile, Credit National said yesterday that it had received full repayment on a Fr2bn loan to Eurotunnel after the French bank exercised a letter of guarantee on the company's bank syndicate.

A Credit National spokesman said the bank still had Fr500m outstanding in junior debt to Eurotunnel debt and Fr185m in senior debt.

But it received early payment on its Fr2bn exposure on 15 November when it exercised the guarantee.

"It is fully reimbursed," the spokesman said. "The payment was shared out among the bank syndicate."

French banks hold around 20 per cent of Eurotunnel's total debt, according to the ratings agency Standard & Poor's. The largest French lenders to Eurotunnel are Banque National de Paris and Credit Lyonnais, which each hold around pounds 200m of debt.

The European Investment Bank also exercised letters of credit on some of its Eurotunnel lending last year, calling on commercial banks to repay some pounds 750m of debt.