eurotunnel in talks with macquarie

http://www.theage.com.au/news/Business/Eurotunnel-in-talks-with-Macquarie-Bank/2006/05/15/1147545258417.html

Anglo-French cross-Channel operator Eurotunnel is in talks that may result in a new debt deal and a restart for the heavily indebted rail link, but with a new management and ownership structure.

Shares in Australia's Macquarie Bank Ltd were placed in a trading halt late on Monday ahead of "a significant announcement" to be made by Wednesday.

European media speculated on Monday Macquarie was in talks to buy into Channel Tunnel operator, Eurotunnel.

It has been reported the French construction group Vinci was discussing the possibility of US investment bank Goldman Sachs and Macquarie jointly buying into Eurotunnel.

Macquarie said it was not in a position to release the planned announcement.

Eurotunnel confirmed on Monday it was in talks with US investment bank Goldman Sachs and the Macquarie Group as part of advanced discussions on a global financial restructuring of its 6 billion pound ($A14.75 billion) debt pile.

The company last month obtained a new deadline of July 12 to talk to all its creditors, and its shares have been suspended in Britain, and from Monday also in France, pending the delayed publication of its 2005 results.

"Eurotunnel confirms that it is in advanced negotiations towards a global financial restructuring for the group with the Ad Hoc Committee of Creditors, and with the Goldman Sachs and Macquarie groups," the company said in a statement.

A Eurotunnel spokesman said the group was still expected to give an update on the progress of its debt talks from mid-May, and this could still be a week away.

"We know some of our high-risk creditors would be happy to get out if there was a bit of cash around. This came up during discussions on a second waiver around February-March time."

"We're looking for our shareholders to get value, we're looking for our creditors to get some value and we're looking for the company to have a future," the spokesman said.

On Monday night Macquarie Bank's shares on the Australian Stock Exchange were placed in a trading halt ahead of a significant announcement to be made by Wednesday.

Monday's statement follows reports that Eurotunnel and its creditors were considering the issue of a hybrid bond which in time could be converted into equity capital or debt. Hybrid bonds combine elements of debt and equity, boosting a borrower's balance sheet.

"To me it looks that Goldman and Macquarie are proposing a debt restructuring, offering hybrid paper in return for the existing debt to extend the maturity and possibly convert debt into equity in the future," said Deutsche Bank analyst Nabil Ahmed.

"There has been talk they contacted (French construction and transport concessions company) Vinci, on the one hand to give their deal a French flavour and to get an transport operator on board," he added.

"Vinci might act as the service partner operating the concession and would put up only a very limited amount of money should the deal materialise," he added.

The Macquarie group contains many firms such as Macquarie Bank Ltd and Macquarie Infrastructure Group, which recently teamed up with France's Eiffage to buy the French government's stake in toll-road firm APRR.

French newspaper Les Echos said last week that holders of junior debt, which represents 4.7 billion euros ($A7.91 billion), would have the possibility of converting part of their bonds into hybrid bonds.

The conversion of debt into hybrid bonds would erase most of the outstanding bonds, which account for most of the subordinated debt, or 2.7 billion euros, Les Echos said.

The hybrid would not apply to senior debt which amounts to 534 million euros.

Eurotunnel shares were suspended in Paris before the statement, and French market operator Euronext was not able to say when trading would resume.

Founded in 1986, Eurotunnel's problems stem from the soaring costs of digging the tunnel linking Britain and France and subsequent delays in the start of train services.

In April, Eurotunnel warned it could not guarantee its future beyond 2006. Chairman Jacques Gounon said Eurotunnel estimated its net loss last year was slightly above 300 million euros, compared with a 2004 loss of 836 million euros.

Eurotunnel's committee of creditors comprises the European Investment Bank, Franklin Mutual Advisers LLC, Ambac, MBIA Inc and Oaktree Capital Management.

Together, they represent 73 per cent of Eurotunnel's co-financier debt. The committee is advised by investment bank Rothschild.

Euronext shares closed at 0.44 euros in Paris on Friday.