EUROPE | Eurostar and Inter-country Railways

[hkskyline]

Eurotunnel to cut 10% of jobs as part of rescue plan
By PEGGY HOLLINGER
8 June 2005
Financial Times

Eurotunnel is close to announcing plans to shed about 10 per cent of its workforce as part of the restructuring programme aimed at rescuing the debt-laden Channel Tunnel operator.

It is understood the group, which employs 3,205 people in the UK and France, is hoping in the coming days to conclude negotiations with unions over a voluntary redundancy programme that could see about 250 jobs being shed in the UK. A further 100 staff are likely to opt for redundancy in France, where labour laws are far tougher.

The news comes as Eurotunnel yesterday launched its new pricing strategy, based on the model used by low-cost airlines, which varies prices according to how early passengers book and at what time they travel.

The initiative is a key part of Project Dare, the restructuring programme launched last year to cut costs and boost revenues.

But Eurotunnel's main problem is its Euros 9bn (Pounds 6bn) debt, and yesterday the group's creditors reiterated their warning that the escalating row between shareholders and management risked jeopardising debt negotiations.

Jacques Gounon, the chairman appointed in January, is fighting an attempt to replace him by rebel shareholder Nicolas Miguet, who last year managed to oust the entire board in a dramatic coup.

In his campaign to win support at next week's annual meeting on June 17, where his appointment must be approved by shareholders, Mr Gounon has said the banks will have to forgive some Euros 6bn in debt.

He argues that, based on the group's forecast revenues and earnings, Eurotunnel's balance sheet is capable of bearing just Euros 3bn in debt.

Creditors said both candidates appeared to be using the same "unrealistic" argument.

"If someone wins this election by raising unrealistic expectations, then they are deluding shareholders into thinking they will get something for nothing," one person close to the creditors said.

"If they think creditors will take a haircut on this, well, it just isn't going to happen."

Eurotunnel is facing two crucial deadlines on its debt.

At the end of this year it will no longer be allowed to roll over debt interest payments into debt. And in 2006, the minimum tariff for users of the Channel Tunnel expires, which could mean the group's revenues will fall sharply.

[Vertigo]

O well, even if it would go bankrupt, the gov't will probably act to keep it open. No way they would leave this expensive piece of infrastructure unused.

[Englishman]

250 jobs being shed in the UK. A further 100 staff are likely to opt for redundancy in France, where labour laws are far tougher.

That sucks. Bloody French labour laws meaning cuts have to be in hte UK. Still it shows how a company might be more inclined to employ people in the UK than France.

[Grygry]

Originally Posted by Englishman

That sucks. Bloody French labour laws meaning cuts have to be in hte UK. Still it shows how a company might be more inclined to employ people in the UK than France.

But eurotunnel employs more in britain than in France anyway, isn't this right?

[ssiguy2]

I f France can outwit the British, more power to em. Thats what happens when Britain becomes a little America.

[hkskyline]

UK: Eurotunnel's Raymond reveals split on strategy
By ROBERT WRIGHT
14 June 2005
Financial Times

Eurotunnel's outgoing chief executive yesterday launched an extraordinary attack on the company's recent direction as the board appointed Jacques Gounon to be chief executive in addition to his present post as chairman.

The events appeared to add a clear split on strategy to the existing bitter personality clashes that have caused severe problems for the board of the Channel Tunnel operator ahead of its annual meeting on Friday.

Jean Louis Raymond told a press conference yesterday, at which he was joined by Herve Huas, formerly deputy chief executive and now a non-executive director, that he would stand for chairman against Mr Gounon at Friday's meeting and put up a list of alternative directors should Mr Gounon be defeated.

Mr Raymond will have the support of Nicolas Miguet, the maverick financier and would-be politician who ran the campaign to unseat Eurotunnel's then Franco-British board at last year's annual meeting, replacing them with an entirely French board of largely inexperienced businessmen.

Mr Miguet had already for some months been running a campaign against confirming Mr Gounon's reappointment as chairman at the AGM.

Mr Raymond went on to call for coming renegotiations with creditors over the company's Pounds 6.4bn debt to be consensual. The present board's aggressive strategy towards creditors could only lead either to the company's bankruptcy or to creditors using their right to substitute their management for the company's in the tunnel's operation, he said.

"In that case, the big losers will be the shareholders and employees," he said.

Eurotunnel needs to renegotiate its debts before a cash crunch that is looming next year.

The new position is a significant reversal of the line Mr Miguet and his supporters took in the run-up to last year's AGM. Then, he told shareholders it was necessary to take a far harder line against creditors than the then board.

However, the latest stance is likely to be welcomed by creditors, who have been concerned by the extreme language Mr Gounon has been using in the run-up to the AGM. He has regularly called on creditors to forgive a majority of the company's debt for nothing in return.

Mr Miguet's appointees have gradually fallen out, since last year's AGM, with board members close to Adacte, a small French Eurotunnel shareholders' action group, whose appointees have made up the bulk of the board since last year's coup.

Mr Gounon is seen as being close to the Adacte-supporting members of the board, who continue to insist that a debt renegotiation can be carried out without diluting the company's existing shareholders' stakes. Most financial observers think that very unlikely.

As Mr Raymond and Mr Huas addressed yesterday's press conference, Eurotunnel announced that Mr Gounon was to take over as chief executive. Mr Raymond's resignation, announced on Friday, took effect from today's meeting.

It is not clear which side on the divided board will have more support at Friday's meeting - or whether the 25 per cent of shareholders needed for the meeting to be valid will vote.

Eurotunnel nevertheless welcomed yesterday statements from PIRC, ABI and ISS, corporate governance analysts, recommending that shareholders support the existing board at the meeting.

The recommendations look unlikely to make much difference to the voting intentions of Eurotunnel's shareholders, who are mostly French private shareholders.

[Englishman]

Originally Posted by ssiguy2

I f France can outwit the British, more power to em. Thats what happens when Britain becomes a little America.

Nah, it works in our favour. Where are you gonna risk employing an extra person. The UK, if business goes downhill you can cut costs. In france you can't. They've twice the UK unemployment rate.


Anyone with BBC2 can watch a programme on this right now!

[China Hand]

Originally Posted by ssiguy2

I f France can outwit the British, more power to em. Thats what happens when Britain becomes a little America.

I do believe it is the obverse, as it was the British who were copied by the USA. My first language isn't English because the American Empire conquered Britain in the 17th C...

[Justme]

Let's be honest, do they really need 3205 people to run the tunnel? It is just a tunnel isn't it?

I wonder if that includes Eurostar?

[Rational Plan]

No but it does include the vehicle shuttle service.

[Justme]

Originally Posted by Rational Plan

No but it does include the vehicle shuttle service.

ok, that's pretty fair, but it still seems a little bloated to me, 3200 makes it a very large company, and considering it's a single tunnel with a single purpose, I just find it odd that so many people need to be on the payrole.

Sometimes downsizing is good.

[elkram]

Originally Posted by Justme

but it still seems a little bloated to me, 3200 makes it a very large company, and considering it's a single tunnel with a single purpose, I just find it odd that so many people need to be on the payrole.

It seems odd to me that so few folks are on the Chunnel's payroll.

[Momo1435]

source: news.bbc.co.uk

Eurotunnel 'saved' by investors

Eurotunnel has won shareholder approval to slash the company's huge debts in a rescue plan that will secure the future of the troubled company.

The French financial regulator said 87% of investors backed the proposals which will cut debts from £6bn (8.9bn euros) to £2.84bn and create a new firm.

"Eurotunnel has been saved," group chief executive Jacques Gounon said.
» continue reading


Let's hope that this has saved Eurotunnel for a long time, it would have been strange if the tunnel would have closed down because of the bankruptcy. Such a big project just has to continue operating with all the investments in the tunnel, the CTRL and the LGV Nord.

[Ning]

I think the EuroTunnel company includes more than only the tunnel. There are the trains, the customer service, the 500 km railway outside the tunnel, etc.

[Nephasto]

^When is the second part of the CTRL (tunnel all the way to st. pancras) going to be completed? I think it is supposed to be in 2007.

Do you know how much time does the fastest eurostar take from London to Paris now?

And when the 2nd part ot the CTRL is finished? I've heard it will take about 2h15min.

[elfabyanos]

Originally Posted by Nephasto

^When is the second part of the CTRL (tunnel all the way to st. pancras) going to be completed? I think it is supposed to be in 2007.

Do you know how much time does the fastest eurostar take from London to Paris now?

And when the 2nd part ot the CTRL is finished? I've heard it will take about 2h15min.

Everything is in this thread:
http://www.skyscrapercity.com/showthread.php?t=410349

[kei]

Although they got all this insurance money, I wonder if they now have to pay higher premiums as a result of the fire?

[hkskyline]

Originally Posted by kei

Although they got all this insurance money, I wonder if they now have to pay higher premiums as a result of the fire?

I suspect probably, but then it shouldn't be as bad as had they encountered a major accident with many casualties.

[hkskyline]

UK: Eurotunnel's Raymond reveals split on strategy
By ROBERT WRIGHT
14 June 2005
Financial Times

Eurotunnel's outgoing chief executive yesterday launched an extraordinary attack on the company's recent direction as the board appointed Jacques Gounon to be chief executive in addition to his present post as chairman.

The events appeared to add a clear split on strategy to the existing bitter personality clashes that have caused severe problems for the board of the Channel Tunnel operator ahead of its annual meeting on Friday.

Jean Louis Raymond told a press conference yesterday, at which he was joined by Herve Huas, formerly deputy chief executive and now a non-executive director, that he would stand for chairman against Mr Gounon at Friday's meeting and put up a list of alternative directors should Mr Gounon be defeated.

Mr Raymond will have the support of Nicolas Miguet, the maverick financier and would-be politician who ran the campaign to unseat Eurotunnel's then Franco-British board at last year's annual meeting, replacing them with an entirely French board of largely inexperienced businessmen.

Mr Miguet had already for some months been running a campaign against confirming Mr Gounon's reappointment as chairman at the AGM.

Mr Raymond went on to call for coming renegotiations with creditors over the company's Pounds 6.4bn debt to be consensual. The present board's aggressive strategy towards creditors could only lead either to the company's bankruptcy or to creditors using their right to substitute their management for the company's in the tunnel's operation, he said.

"In that case, the big losers will be the shareholders and employees," he said.

Eurotunnel needs to renegotiate its debts before a cash crunch that is looming next year.

The new position is a significant reversal of the line Mr Miguet and his supporters took in the run-up to last year's AGM. Then, he told shareholders it was necessary to take a far harder line against creditors than the then board.

However, the latest stance is likely to be welcomed by creditors, who have been concerned by the extreme language Mr Gounon has been using in the run-up to the AGM. He has regularly called on creditors to forgive a majority of the company's debt for nothing in return.

Mr Miguet's appointees have gradually fallen out, since last year's AGM, with board members close to Adacte, a small French Eurotunnel shareholders' action group, whose appointees have made up the bulk of the board since last year's coup.

Mr Gounon is seen as being close to the Adacte-supporting members of the board, who continue to insist that a debt renegotiation can be carried out without diluting the company's existing shareholders' stakes. Most financial observers think that very unlikely.

As Mr Raymond and Mr Huas addressed yesterday's press conference, Eurotunnel announced that Mr Gounon was to take over as chief executive. Mr Raymond's resignation, announced on Friday, took effect from today's meeting.

It is not clear which side on the divided board will have more support at Friday's meeting - or whether the 25 per cent of shareholders needed for the meeting to be valid will vote.

Eurotunnel nevertheless welcomed yesterday statements from PIRC, ABI and ISS, corporate governance analysts, recommending that shareholders support the existing board at the meeting.

The recommendations look unlikely to make much difference to the voting intentions of Eurotunnel's shareholders, who are mostly French private shareholders.

[hkskyline]

Tunnel deepens UK-French divide
The French directors and shareholders must reach agreement with the mainly British and US debt holders
By ROBERT WRIGHT
15 June 2005
Financial Times

When French and British tunnellers met under the English Channel in December 1990, it was hailed as a transforming moment: the Channel Tunnel would bring France and Britain culturally and economically closer.

But as Eurotunnel, the tunnel operator, approaches a vital annual meeting this Friday, the venture has not only failed to bring the two countries closer together but has underlined their deep differences.

Crucial to Eurotunnel's future will be whether its French directors and mostly French shareholders can reach agreement with the mainly British and American holders of the company's Pounds 6.3bn (Euros 8.9bn) debt.

In spite of the fanfare that greeted the Channel Tunnel opening in 1994, Eurotunnel has struggled to make money. Higher-than-expected building costs and lower-than-expected traffic, especially on the Eurostar passenger services and international freight services, have left it with soaring debts.

The company needs a restructuring agreement to avoid insolvency next year or in 2007. Its revenues are set to fall sharply when agreements guaranteeing minimum income from rail operators expire in November 2006. At the same time, compulsory debt repayments start in 2006, with payments on most debt coming in 2007.

Yet, since last year's annual meeting on April 7, when angry French shareholders voted out the incumbent Franco-British board, the new, entirely French board's efforts to respond to shareholders' unhappiness over the creditors' demands have pushed the two sides further apart.

Relations have reached a new low in recent weeks after Jacques Gounon, chairman, asked creditors to forgive all but Euros 3.3bn of the company's debt.

People close to the main creditors' group have branded the demand economically illiterate and have warned that Mr Gounon is making it harder to persuade shareholders to accept the dilution of their shareholdings and loss of control that will result from any restructuring agreement.

If the company either defaults on debt or interest payments, or becomes insolvent, credit agreements give creditors the right to take over management of the tunnel and run it until their debts are repaid.

But Mr Gounon has said in many interviews that the French government and courts would never allow such a move - known as substitution - for such a politically sensitive company.

In an interview with the Financial Times, he dismisses the creditors' position as "Anglo-saxon". "We have to take care (bear in mind) that Eurotunnel is more a French company than a UK one," he says.

Creditors should look at the company's cash flows and agree the level of debt the cash flows are likely to repay over the life of Eurotunnel's concession to run the tunnel, which expires in 2086, Mr Gounon says. A further conversion of debt to equity - the last was in 1998 - would be unacceptable to shareholders.

"I'm just saying to the creditors, 'OK, if you want to make a substitution you will take over the company'," he says. "'But this will not change the cash flows and you will have on top of that to manage the company, which is not an easy task'."

Mr Gounon is backed by board members supported by Adacte, a French Eurotunnel shareholders' group. He now takes an even more hardline position than board members allied with Nicolas Miguet, a share tipster and would-be politician who led the revolt at last year's annual meeting.

At Friday's meeting Mr Gounon will face a challenge for the chairman's position from Jean Louis Raymond, an ally of Mr Miguet's, who on Monday resigned as chief executive. The board has appointed Mr Gounon to succeed Mr Raymond, naming him executive chairman.

Mr Miguet, who last year branded the creditors "banksters" in a populist campaign, now accepts that some dilution of shareholders' interests is inevitable.

At the heart of the problems is the unusual shareholding and debt structure of Eurotunnel. When the company was awarded the concession to build the Channel Tunnel in 1986, private shareholders in France - where publicity guaranteed nearly risk-free returns - bought far more shares than British individuals.

About 1m private French shareholders - against 100,000 in the UK - have retained shares in the hope of one day making a return.

Much of the debt has been sold below face value to speculative investors, such as hedge funds, who are likely to take a very tough line in restructuring talks.

Mr Gounon's campaign for a debt write-off and against further shareholder dilution has echoed French shareholders' worries but alienated debt-holders.

To have any chance of rescuing Eurotunnel from insolvency, however, the board will need to sell at least one agreement diluting shareholders' interests very soon.

The company has the right to convert Pounds 500m of debt held in so-called stabilisation notes into equity at one share for every Pounds 1.14 of debt - well above Eurotunnel's current 16 1/4p share price - by the end of this year.

The conversion must be approved at an extraordinary meeting, which must be called by October.

Yet Mr Gounon doubts shareholders would agree even to such an advantageous dilution, let alone the more comprehensive agreement necessary to stabilise the company.

It is a position that has gradually exasperated creditors. They now appear more ready than before to consider substitution to remove an erratic management.

Even a new management led by Mr Raymond might struggle to complete a comprehensive restructuring agreement in the little time Eurotunnel has left to secure one. The last restructuring took 18 months.

Creditors also fear they might, as Mr Gounon suggests, face problems from the French government and courts if substitution becomes necessary.

The tunnel has significant further scope to deepen the Franco-British divide.