Enormous, colossal, gigantic, monumental - no word seemed too extreme for the press when describing the huge debt of the franco-british firm, Eurotunnel, which culminates at the incredible amount of 9.1 billion euros.

This is not a recent state of affairs. The press recounted the company's successive ups and downs over the past twenty years, which has turned the so-called "construction site of the century" into an absolute nightmare and a financial abyss for both Eurotunnel shareholders and creditors alike. The articles pointed out the errors made right at the beginning by both the British and French governments, who chose to finance a government infrastructure with private funding. The press also described how the successive governments on both sides of the Channel backed out on the project, and Eurotunnel's poor management which was frequently described as "dubious". The end result is "a fiasco commensurate with its ambitions" as La Tribune wrote.

Today, the threat of insolvency is very real. Crushed under the weight of its debt, Eurotunnel might very well be declared insolvent. The press pointed out the efforts of the small shareholders and the major creditors and indicated that the refinancing plan proposed by Jacques Gounon, Eurotunnel's CEO, would have reduced the group's debt to 4.2 billion euros. But the negotiations fell through. The minority bondholders, led by Deutsche Bank, rejected any middle ground agreement and presented an alternative plan that was not approved. Last July 12th, the talks collapsed. Following this setback, the operator applied to the Commercial Court of Paris for protection from its creditors.

The media pointed out the various tensions generated by this situation among the shareholders and within the firm itself. Jacques Gounon told the reporters that he couldn't understand that an institution such as Deutsche Bank had maintained its unreasonable demands. He was concerned about the consequences on the 2,300 employees and 800,000 shareholders of the group. The CEO was seen to be doing everything he could to save Eurotunnel from liquidation. The press mentioned his capacity to deal with major crises and his experience from former difficult situations. The Court is expected to make its decision on 25 July and until then the sword of Damocles will continue to hang heavy over the Channel Tunnel operator.

Sylvie Testard-Ramirez, Managing Director of Echo Research France
Analysis and commentary by Echo Research: www.echoResearch.comon the basis of 88 articles which appeared in the daily national press online between June 1st and July 13th 2006.

20 July 2006