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Will latest rescue bid nally put Eurotunnel on the right track?

Analysis - Restructuring Eurotunnel's ownership was the nal acceptance of nancial failure. Jon Young explains the latest rescue attempt.

'EUROTUNNEL IS saved, ' declared chairman of the joint board Jacque Gounon last week as shareholders voted for a restructuring known as the Safeguard Plan, designed to rescue the tunnel operator from bankruptcy.

After years of planning and months in its execution, the strategy for freeing Eurotunnel of its debt concerns is only days away from completion.

On 22 June joint owners the French Eurotunnel SA and the English Eurotunnel Plc will hand over control of the channel tunnel to Groupe Eurotunnel, a newly created French firm owned by the tunnel's creditors and the shareholders of the two existing owners.

In exchange for a £2.13bn reduction in the tunnel's £6.18bn debt the 198 creditors will receive some 87% of the company's shares.

Shareholders of Eurotunnel SA and Eurotunnel Plc will be given equal shares in the new Groupe Eurotunnel and the same number again in warrants, which can be exchanged for shares at a later date.

The offer document sent out to shareholders explained: 'The purpose of the reorganisation is substantially to reduce the amount of Eurotunnel's current debt in order to enable Eurotunnel to continue business [and] ensure the stability of the group.

'If the reorganisation is not completed, it is not certain that Eurotunnel could continue as a going concern.' Restructuring Eurotunnel was the nal acceptance of the financial failure that has blighted the project almost since its inception. Gounon's claims of salvation have been heard before.

In the early stages of its construction, the tunnel's costs soared well beyond those predicted. The project was only saved in 1987 by a year-long global campaign by Colin 'Silvertongue' Kirkland to sign up new creditors, through which it gained another £5bn of nance.

Eurotunnel was saved. But by the time it opened in 1994 it was so badly in debt it needed more passengers than forecast. It didn't get them. In fact passenger numbers fell drastically short of estimates.

Laden with debt, the tunnel faced an uphill struggle. But it was once again rescued by a minimum payment condition for tunnel use levelled at any firms requiring track access, fees that were subsidised by the government. This kept revenues arti ially high until 2006 but beyond that no assistance was offered.

By mid 2003, after a notable drop in passenger numbers, the st call for a restructure was heard as it became clear the tunnel was not going to be able to repay its debts.

But before any real legwork could be done to save the company, shareholders - angry at the board's actions, believing they favoured the creditors more than them - ousted the entire French-Anglo board, replacing them with a solely French team.

In July last year the firm sought bankruptcy protection under French law and devised a new restructuring plan called the Safeguard Plan.

The plan was approved in April by the French authority overseeing the stock exchange Autorite des Marches Financiers and was last week agreed by shareholders.

The future for Eurotunnel remains uncertain. The completion of the link up to St Pancras may drive the desperately needed traffic flows, but it will do little to impact on the freight transport side.

Perhaps the tunnel has been saved but will this be for the final time?

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