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.

[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.

[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.

[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.

[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!

[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.

[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.

[hkskyline]

Eurotunnel's Raymond to propose board of 3 British, 6 French people
16 June 2005

PARIS (AFX) - Jean-Louis Raymond will propose three British and six French people as directors of Eurotunnel SA/PLC when he mounts his challenge to win the chairmanship of the debt-laden Channel tunnel operator at tomorrow's AGM, he said on BFM radio.

Raymond, who resigned as chief executive last Friday after falling out with acting chairman Jacques Gounon, did not name the people he will put forward for the nine-member board.

He said he has not sought the support of Nicolas Miguet, the shareholder who is leading the campaign to block the confirmation of Gounon as head of the company.

Raymond announced on Monday that he will challenge Gounon for the post a will put forward of full slate of nominations for all places on the board.

Eurotunnel investment units rose amid strong demand today as voting for the rival candidates for the chairmanship was thrown into confusion when the company said some shareholders have voted twice.

At 1.57 pm, Eurotunnel was up 0.02 eur or 8.00 pct at 0.27 eur with 10.3 mln units traded as the CAC-40 index added 17.09 points or 0.51 pct to 4,201.45.

A Eurotunnel spokesman told AFX News that some people have filled in proxy voting forms sent out by Miguet and have also submitted proxy forms direct to the company.

Although Miguet is a convicted fraudster the spokeswoman said there is no indication that the double voting is attempted fraud.

It is too early to assess the scale of the duplicate voting, she said.

Eurotunnel announced earlier that as of 5.00 pm yesterday its agents had received proxies and votes from more than 75,000 shareholders, representing a provisional quorum of over 40 pct for tomorrow's annual general meeting.

Tabulation of the proxies is continuing 'due to the appearance of a certain number of doubles', it said, without giving details.

At the previous AGM, in April last year, rebel shareholders voted out the entire board.

Eurotunnel has until July 15 to submit proposals to creditors for restructuring its 9 bln eur debt.

Gounon wants the debt written down to 3.3 bln eur and has predicted the company could collapse as soon as October if no agreement is reached.

[hkskyline]

Eurotunnel pleads for removal of government 'constraints'
Angela Jameson
21 June 2005
The Times

Eurotunnel will approach the French and British Governments for help to get back on its feet, once the company has agreed the outline of a restructuring plan with its creditors.

Jacques Gounon, executive chairman of the Anglo-French Channel Tunnel group, said yesterday that he hoped certain "constraints" that prevent the debt-laden Eurotunnel from increasing its revenues could be removed.

"Some government involvement could be helpful on specific tax issues for example," M Gounon told British shareholders who attended an information meeting in London.

"I have been upset to see that nothing has changed since 1987. We still have the same constraints we had ten years ago, even though everyone knows that world has fully changed."

A spokesman for the company said that Eurotunnel was looking for an easing of red tape, such as the requirement to run one shuttle per hour even if it is empty. It also wants a lifting of restrictions that make it difficult for Eurotunnel to become a fully fledged railway operator in its own right.

M Gounon has said that Eurotunnel, which is struggling under the weight of its Pounds 6.3 billion debt, could compete with other international operators or run a freight operation, as a way of kickstarting traffic through the tunnel.

Ruling out a direct government bailout, M Gounon's comments raised the prospect that the company could implement elements of Project Galaxie, the rescue solution proposed by the former British management team. The Galaxie plan, rejected last year, envisaged Eurotunnel joining forces with another transport infrastructure company, such as London & Continental Railways, in a complex financial deal that would allow it to restructure its debt.

There was support for M Gounon from most British shareholders, who were impressed by the French engineer's handling of the meeting and some very early improvements in operations.

"(M) Gounon has shown leadership and guts," Tony Hein, a member of the British shareholder committee, said. "His approach is bullish and who knows whether he will pull it off, but what this company really needs is a period of stability, so that it can be given a chance."

There was applause for M Gounon when he told investors to "please forget" Nicolas Miguet, the French maverick investor who has been leading shareholder activism in France. M Miguet's decision to give his votes to M Gounon on Friday secured the chairman's overwhelming victory at the annual meeting in northern France.

"M Miguet is part of the past and I have no comment to make about his behaviour," M Gounon said.

The executive chairman said that he expected Herve Huas, the former finance director, and Jean-Louis Raymond, the former chief executive, to resign the board positions they have just been elected to, as soon as Friday.

"They tried to push me out, fully supported by M Miguet. If they have any sense of honour they will resign," M Gounon said.

The meeting heard that 2005 had started well and that Eurotunnel was on track to meet or to beat annual business targets for its car, coach and truck shuttles.

[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?

[hkskyline]

Eurostar CEO says profit possible in 2008 -paper

BRUSSELS, April 22 (Reuters) - Eurostar, the train service linking London to Paris and other European cities, could become profitable in 2008, its Chief Executive Richard Brown told the Saturday edition of the Belgian De Morgen daily.

"The passenger total has grown a little while our costs have not risen. That means that there is profit on the horizon. I think in 2008, but it is difficult to make forecasts," he said.

Brown said Eurostar profits depended largely on the actions of railway operators SNCF in France and SNCB in Belgium.

"They are the operators there of Eurostar... In the end our profit lies in their hands. But both in Belgium and in France we are on course in terms of both passenger numbers and income," he said.

On Tuesday Eurostar said first-quarter sales rose 7 percent from a year earlier to reach record levels of 125 million pounds ($219 million).

The group said 1.7 million travellers used the service during the first quarter and added it had benefited from a surge in the number of business travellers.

The train operator has had to contend with stiff competition from budget airlines but said on Tuesday it was winning market share at their expense.

Eurostar forecast a strong performance in the second quarter and said it expected to benefit from the summer World Cup soccer tournament in Germany and also the release of "The Da Vinci Code" movie, which is set in Paris and London.

[De Snor]

I was wondering how the European train operators are facing the open market.
In the UK , Germany and the Netherlands private companies are coming along but how far reach their potential ?

What is your opinion about this ?

[JDRS]

Well the privatisation of Britains railways has been a complete mess from day one. Only now are things slowly starting to change and franchises being removed for bad performance on the part of rail operators. In addition with the formation of Network Rail which oversees the maintenance, since the collapse of Railtrack following poor management and accidents, there has been alot of cash pumped in but a long way to go yet...

[hkskyline]

FACTBOX - French legal situation around Eurotunnel

July 13 (Reuters) - Anglo-French rail tunnel operator Eurotunnel intends to seek protection from creditors under French law after the overnight failure of last-minute debt restructuring talks.

Dubbed the French "Chapter 11" the "Law for the rescue of companies" of July 25, 2005 adapted an older law of 1985 in the case a company cannot meet its payment obligations.

Following are the main details of procedures laid down in the law:

-- The main aims of the law are to allow a company that seeks French Chapter 11 protection to continue operating, save jobs and clean up its liabilities. The legal procedure comprises parties representing creditors and employees.

-- Once the process begins, there follows an "observation period" that usually lasts up to six months.

-- The company's head continues to run the enterprise during this time but an administrator monitors the company's progress.

-- A French court can impose a recovery plan which could entail selling off businesses or changing the board.

-- If the company is still unable to meet payments or pay off its debt, a French court can force it into liquidation.