Eurotunnel board deposed in shareholder revolt

The management at Eurotunnel, the Channel tunnel operator, has been deposed following a vote at its annual general meeting in Paris. The discontent amongst the shareholders, the majority of which are French and private citizens, has been caused by the collapse of Eurotunnel’s share price over the last few years. Many have seen the value of their investment fall by as much as 90%.

The problems for the company arose when numbers of passengers and volumes of freight failed to meet forecasts set the last time the company was re-structured in 1997. Levels of traffic have not been helped by the high access charges which Eurotunnel is required to charge by the terms of its borrowing agreements with over 200 banks. Worse for the prospects of the company is the fall in guaranteed revenues which will occur in 2006 when an agreement with Eurostar, the high speed passenger train service, comes to an end.

The future for the company is unclear. The incoming chairman has announced his intention to re-negotiate the company’s £6.4bn debt although whether its creditors will be willing to support any re-financing initiative is uncertain. The new chairman has threatened to default on the debt in the hope that the French and British Governments step in to bale out the company. However if this happens one alternative for creditors would be to set up a ‘substitute’ company which would take over the running of the tunnel for the foreseeable future. This would see the shareholders which threw out the previous management lose all the value of their investment.