Eurotunnel victory may turn sour

The terms of Eurotunnel's massive debt put creditors in the driving seat, despite the ousting of the board this week by retail shareholders, according to creditors and analysts yesterday.

In an historic victory for small investors, shareholders of Eurotunnel voted to oust the Channel Tunnel operator's board at a stormy meeting on Wednesday, pledging to put the interests of shareholders first and get the company back on track.

But that victory may turn sour.Creditors, who had no role in Wednesday's annual meeting, say they still call the shots.

However, the company is groaning under the weight of nearly £7 billion (€10.6 billion) of debt, compared with 2003 earnings of just £315 million.

"There's a presumption that new management will have a reality check when they see the constraints they're operating under," said one London-based analyst yesterday.

Creditor power could extend as far as banks appointing their own management.

The new all-French board, led by Mr Jacques Maillot and Mr Jean-Louis Raymond as chairman and chief executive, said its priority was to talk to creditors and renegotiate the company's huge debt-pile.

But Eurotunnel was now rudderless and without a visible plan, according to observers.

"New management will find a plane load of financing documentation, which conditions the company into remunerating its debtholders first and equity last," said Fitch Ratings in a statement affirming Eurotunnel's debt ratings.

And the CFDT, one of France's main unions, said the company was "like a bus without a driver".

"The new board has no right to fail and no right to disappoint," it said in a statement.

Despite such scepticism, there was hope that the new management could lever assistance from France, which would soften tension between shareholders and creditors.

Both France and Britain quickly dismissed any possibility of public cash. However, some commentators reckon the new managers may win indirect support from Paris by persuading state-owned rail firm SNCF to extend a deal that guarantees Eurotunnel a minimum of revenues.