Debt write-off rejection leaves Eurotunnel on bankruptcy edge |
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Thu, 28 Apr 2005 15:35
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It seems like the end of the line (or track) is looming for the Channel Tunnel operator, Eurotunnel, who, weighed down with huge debts of €9 billion ($12 billion). Eurotunnel may have to finally call it quits and is expected to be bankrupt by 2007, according to it's own officials, if creditors do not agree to cancel at least £4bn of their £6.3bn debt.
However, after a rejection of Eurotunnel demands for a £4bn write off, creditors could utilise their power of substitution and take over the tunnel operator simply by declaring default at any time. In a desperate bid for survival, Eurotunnel has requested the British and French Governments intervene sooner rather than later and stop creditors from doing so.
| Eurotunnel, anyway, is in tatters, apparently playing a lost game of clearing its huge debts. Chairman, Jacques Gounon, candidly stated, "If the debt is not drastically improved, Eurotunnel will not make it through the first quarter of 2007." While agreeing to the claims that certain shareholders were in favour of Eurotunnel’s bankruptcy, a hopeful Gounon said that they would arrive at a solution in the coming months.
Eurotunnel formally reported losses of E570 million in 2004, attributing the damage to the price competition that cross-channel ferries and airlines with economical fares posed. Shuttle services were known to slip 7 per cent and reach E285m, again on account of the exacting competition faced by the truck market along with a decline in the number of passengers using the Eurotunnel shuttle.
Even though the loss decreased from E148 million in 2003 to stand now at E127 million in 2004, it is clear that Eurotunnel is smarting under huge interest payments of about E298 million (as in 2004). Furthermore, it has to even brace itself for a debt restructuring by the end of 2005 since all interest payments have to be now made in cash.
Nevertheless, an optimistic Gounon reiterated that Eurotunnel had not thrown in the towel and affirmed that he was “determined to protect the interests of this company and to reduce the burden of the financial charges.”
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