One year since ousting of Eurotunnel's management

Rebel French shareholders ousted Eurotunnel’s management with typical Gallic fervour in Paris a year ago today.

Cheers resounded around an exhibition centre near Charles de Gaulle airport as maverick French investor Nicolas Miguet, cigar in hand, celebrated an unprecedented coup.

A group led by failed French presidential candidate Mr Miguet persuaded thousands of small investors to replace Eurotunnel’s Anglo-French board with a relatively unknown all-French team.

The shareholders, some of whom had sunk their life savings into the debt-laden firm, believed they were handing it a lifeline.

The new team pledged to get tough with Eurotunnel’s bankers and to seek help from the French and UK governments.

However, 12 months on, analysts say the group has made little progress in getting to grips with its problems.

It has only just asked creditors for permission to start a restructuring of its £6.2 billion debt that could leave shareholders with nothing.

Chairman Jacques Maillot resigned in February after growing criticism from investors of the firm’s lack of progress.

Meanwhile, the clock continues to tick on potentially damaging changes to the group’s finances.

Eurotunnel needs to agree a deal with its lenders before next year, when it must start paying all the interest on its debt in cash, instead of convertible bonds.

The firm is also facing the expiry at the end of 2006 of the minimum charge that Eurostar and rail freight firms pay to use the tunnel, which could cut its income by up to £40 million.

If the banks lose patience, they can resort to substitution, which removes any obligation to pay dividends to investors and allows them to delist the firm and to run it for cash.

Hilary Cook of Barclays Stockbrokers said the new management had made a valiant attempt to boost business with more aggressive marketing measures such as Project Dare, which aims to match the group’s shuttle services more accurately to demand.

Long standing structural and market-related problems, such as inadequate revenues, ferry and low cost airline competition and the forthcoming changes to usage charges, had not helped.

The original structure of Eurotunnel, which British premier Margaret Thatcher had insisted should be funded entirely by the private sector, was wrong.

“The tunnel cost too much to build with too much debt,” she said. “You really had to structure the group differently and to realise it would cost more to build than the revenues would allow.”

However, she said the new board had failed to get to grips with the debt restructuring.

“Until they manage to do a debt-for-equity swap, the business is not going to be financially viable.”

Another analyst, who declined to be named, said the shareholder coup had removed “a number of capable people” on the previous board, which included chief executive Richard Shirrefs, chairman Charles Mackay and top UK rail executive Chris Green.

They had proposed a rescue strategy including lower access charges to passenger and freight operators and the launch of the firm’s own rail freight service through the tunnel.

“Getting rid of the existing board was an act of madness,” the analyst said.

“The present board doesn’t appear to have a strategy or a hope. If I were a betting man, I would bet on the creditors taking control and appointing a new management team.”

Roger Ford, technical editor of rail industry magazine Modern Railways, said he believed Eurotunnel had lost a year of valuable breathing space.

“It looks as though all the French investors who bought into the company are now regretting it bitterly,” he said.

“I think they thought the various governments were going to bail them out, but of course that didn’t happen.

“Now they are going to have to face the consequences.”