Eurotunnel Bond Switch Planned for £4bn Debt

By Ross Tieman, Evening Standard, London

May 9–Eurotunnel’s board meets today to consider turning up to £3.95 billion of its debt into new quoted hybrid convertible bonds.

Under the proposed plan, Goldman Sachs and Australia’s Macquarie Bank would offer to buy the bonds from the Channel Tunnel operator’s junior creditors, providing an exit route for institutional investors who choose to take it.

Turning part of Eurotunnel’s £6.2 billion debt into traded bonds would have the benefit of reducing the overborrowed group’s interest payments without the massive shareholder dilution that would stem from a classic debt-for-equity swap.

It would therefore make it much easier to win over the French private investors, who dominate the company’s share register, to the financial restructuring at the company’s end-June annual meeting.

Under the plan, said to be well advanced, the convertible bonds would turn into equity only if Eurotunnel was unable to make payments on its debt.

Eurotunnel has warned it will run out of cash if it fails to reach a deal with creditors by next January, when interest payments fall due. Its shares have been suspended on the London Stock Exchange on orders from Britain’s financial regulator, the Financial Services Authority, after if failed to publish 2005 accounts.

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