Eurotunnel on Tuesday had its request for bankruptcy protection delayed by the commercial courts in Paris until August 2, an extension that gives the company’s feuding creditors more time to negotiate.
Eurotunnel, which asked to be placed under court protection after its bondholders rejected a restructuring deal adopted by the majority of its lenders, described the postponement as “opportune”.
The troubled company said there was now an “implicit consensus” that its sustainable debt level was about £2.9bn and that existing shareholders must retain a significant proportion of the equity.
Jean-Pierre Mattei, chairman of the Association of Eurotunnel’s Secured Bondholders (Arco), which represents the holders of the lowest ranked £1.9bn of Eurotunnel’s £6.18bn debt, said he hoped to reach or be close to an agreement by the court’s decision on August 2.
“We think it’s possible to find ourselves together,” he said, adding that if the extension did not prove sufficient, negotiations could continue under the court’s auspices. “If creditors can reach a solution like that, so much the better,” he said.
He rejected a suggestion that Arco could first negotiate with other creditors in the absence of Eurotunnel’s management. “It’s always necessary for the management to be there,”he added.
However, one person familiar with the situation, said: “The parties are still quite a long way apart. Despite what has been said, nothing has moved very much.”
A preliminary restructuring plan was agreed last May between Eurotunnel’s management and the Ad Hoc committee of senior creditors that represent the majority of the £3.95bn debt in Eurotunnel’s £6.18bn debt pile. The agreement was rejected by Arco, which subsequently devised its own restructuring plan that both the Ad Hoc committee and the company rejected.
As a result of the delay, Eurotunnel will have to make a £78m interest payment on its debt. The company has an additional £74m to pay on the debt before the end of the year. Any failure to pay interest is likely to complicate efforts to rescue Eurotunnel from the threat of insolvency posed by its current debt mountain.
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