Indebted tunnel operator Eurotunnel proposed writing off more than half its debt after posting what it called disappointing results on Tuesday, in an opening gambit before debt talks start in July. The proposal was immediately swatted down by Eurotunnel creditors as unacceptable. Eurotunnel, which operates the undersea rail link between England and France, said it must cut its 9 billion euro ($11.76 billion) debt pile to 3.3 billion euros in order to survive.
"If the debt is not drastically improved, Eurotunnel will not make it through the first quarter of 2007," Chairman Jacques Gounon told reporters, saying he was seeking a significant write-off.
The company's write-off proposal was partly based on the fact that Eurotunnel debt already trades at just 4.4 billion euros, well below what it was originally worth.
Some analysts viewed the statement as grand-standing by the board ahead of a shareholder AGM on June 17. Shareholders voted out the entire board in 2004 for what they characterised as the appeasement of creditors.
Eurotunnel earlier announced that 2004 losses were narrowed due to lower interest payments and lower charges on declining asset values, but it said it had responded too slowly to tough competition from ferry companies and low-cost airlines.
Car and coach traffic and market share fell in the year. The 2004 loss narrowed to 570 million pounds in 2004 from 1.334 billion pounds in 2003.
The results were affected by a 395 million pound impairment charge due to lower-than-projected cash-flows, well down on 2003's impairment charge of 1.3 billion.
The company remained crippled by interest payments, which declined to 298 million pounds for the year from 318 million previously, almost double the group's 2004 operating profit of 171 million pounds.
Eurotunnel is under pressure to restructure its debt with banks this year because it must pay all interest in cash from the end of December, instead of the current mix of cash and more debt.
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