Eurotunnel Restructuring Plan Sparks Rival Bidding War

Strategic Insights -

Eurotunnel, the operator of the 20-year-old Channel tunnel between Britain and France, faces a crucial decision after three major banks, including Barclays, signed up to a sweeping restructuring plan aimed at slashing the company's debt from £6.2 billion to £2.9 billion. The deal, which would see control of the tunnel pass to a banking consortium, has been met with a rival refinancing proposal from Citigroup, which could allow bondholders to maintain their share value without diluting the company's ownership structure. The outcome will determine the fate of Eurotunnel, with a rejection of the deal at the annual meeting on 12 July risking bankruptcy.

Key Takeaways:

  • Eurotunnel's current debt stands at £6.2 billion, with a restructuring plan aiming to reduce it to £2.9 billion.
  • The plan, signed on 23 May, includes the establishment of a new French holding company that will make a general offer to shareholders.
  • The consortium of Barclays, Macquarie-Bank, and Goldman Sachs will provide £1 billion of new finance to implement the restructuring plan.
  • Citigroup has produced a rival refinancing proposal that would cut Eurotunnel's debt without diluting shareholder value.
  • Under the Citigroup plan, senior debt holders would receive par value for their lending, while junior debt holders would receive a mixture of debt and payment-in-kind (PIK) notes.
  • Bondholders would be reimbursed in PIK notes at a rate above the bonds' current market value.

Statistics:

  • Eurotunnel's current debt: £6.2 billion
  • Target debt reduction: £3.3 billion
  • New finance provided by Barclays, Macquarie-Bank, and Goldman Sachs: £1 billion
  • Estimated value of Eurotunnel under Citigroup's proposal: £4.5 billion
  • Amount of debt underwritten by Citigroup: over £3.5 billion
  • Number of Eurotunnel private shareholders: 1 million

Sources:

  • "Eurotunnel's Gounon says no to creditor committee takeover." The Financial Times, [no date]
  • Eurotunnel press release, 23 May [no date]
  • "Eurotunnel founder plots rival bid to rescue firm." The Financial Times, 11 July 2019