Eurotunnel 'months' from collapse

STRUGGLING Channel tunnel operator Eurotunnel has just four months to reach agreement with creditors before facing possible financial collapse. The warning came this weekend from the company's chairman, Jacques Gounon, and is seen as an effort to turn up the heat on rebel shareholders who are expected to bay for blood when they turn up at Eurotunnel's annual meeting on Friday.

Last year some 60,000 investors turned up and sacked the entire Eurotunnel board. The company, which has a 100-year concession to run the tunnel until 2086 is in deep financial trouble with debts estimated at £6.5bn. Restructuring that debt is a priority as the company has until July 15 to notify creditors of proposals for restructuring the debt. Company insiders believe that Eurotunnel can only sustain about £2.2bn of debt ? restructuring will involve creditors writing off the balance.

This, however, could be a hard sell for Eurotunnel management and there is no certainty that creditors will agree to such a move. Many are angry that Gounon is calling for such a sharp write-down arguing that it is simply 'not realistic' to expect them to take such a financial hit. Gounon, however, said this weekend that if agreement could not be reached with creditors, the company would have to decide whether the risk of defaulting on loans would question its ability to carry on in business as a going concern. If that happened, shareholders could expect to see very little at all back of their original investment.

Eurotunnel was hit with a fresh setback on Friday when chief executive Jean-Louis Raymond resigned, citing Gounon's ongoing criticism as the final straw. Raymond became chief executive in April last year when rebel shareholders voted out the whole of the previous board. He said on Friday that he will stay on as a non-executive director, although he is expected to launch a fierce attack on Gounon at the annual meeting and lead calls for him to step aside.

He is likely to be joined by activist shareholders who believe that Gounon's demands for a debt write-down are unreasonable. Nicolas Miguet, an activist shareholder who helped organise the campaign that led to last year's coup, is currently calling for shareholders to block the confirmation of Gounon as chairman at next Friday's meeting. Miguet says he will only vote for Gounon at the meeting if the chairman presents details of his debt restructuring proposals.

Financial presure at Eurotunnel means the company could meanwhile press ahead with plans to axe about 10% of its 3,205-strong workforce.