Debt-laden Eurotunnel shares drop more than 10%

SHARES in Eurotunnel dropped more than 10% yesterday amid growing fears that creditors were preparing to take control of the business.

Analysts said speculation that British and French governments may urge banks to take control of the debt-laden Channel Tunnel operator was helping to unsettle investors.

According to reports, ministers are closely monitoring events at Eurotunnel after French investors ousted the board in a revolt last week.

The governments are worried that the instability at Eurotunnel will lead to resignations of technical and safety personnel, the newspaper claimed. Justin Urquhart-Stewart, of Seven Investment Management, believed ministers wouldalready be in contact with Eurotunnel creditors over the company’s future.

Shares in Eurotunnel have now fallen by more than 18% since the change of board on Wednesday as investors fret over the viability of any future restructuring plan.

A report in Britain’s Sunday Telegraph said the banks will this week set a deadline of three months for Eurotunnel directors to prove their competence or give up control of the business.

Eurotunnel has a debt mountain of £6.4 billion and last year made losses of £1.3bn. It must begin making capital repayments in 2006, but the size of its losses means it is unable to do so.

Former chief executive Richard Shirrefs had drawn up a recovery plan known as Project Galaxie that included cutting access for train operators and launching a freight service from Britain to the continent to boost company revenues.

However, at a meeting with British shareholders in London on Thursday, new director Herve Huas gave the impression that he and his colleagues were considering adopting at least part, if not all, of the previous management’s recovery plan.