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Eurotunnel SA/Plc Eurotunnel Tier 3 creditors sue bondholders - report


PARIS (AFX) - Two of the largest holders of Eurotunnel SA/Eurotunnel PLC's
6.2 bln stg/9.1 bln eur debts have issued High Court proceedings against the
company's bondholders, claiming the Channel Tunnel operator's restructuring plan
contravenes an earlier agreement between lenders, the Daily Telegraph reported,
without naming its sources.
American investors Oaktree Capital Management and Franklin Mutual Advisers,
which together own about half of Eurotunnel's 1.78 bln stg Tier 3 debts, are
suing Law Debenture, the trustee to the bondholders, according to the report.
The action was launched on the Friday before Christmas, it said.
The US investors claim that Eurotunnel's restructuring plan, agreed by
bondholders last month, contravenes a "turnover provision" in a legally binding
agreement between lenders, which was signed in 1998 and amended in 2002.
The agreement is said to reinforce the hierarchy of lenders, making it clear
that the bondholders, with bonds having a face value of 1.9 bln stg, rank below
Tier 3 creditors, the Telegraph noted.
On that basis, Oaktree and Franklin claim, it would be illegal for
bondholders to be allowed to swap their bonds for equity in the restructured
company unless the Tier 3 creditors were paid out in full, the report said.
Under Eurotunnel chairman Jacques Gounon's restructuring plan, Tier 3 debt
holders and the bondholders share 240 mln stg cash and a 1.28 bln convertible
bond which gives them up to 33 pct of the equity in the restructured business.
While Eurotunnel has never revealed the split, bondholders end up with 14
pct of this equity and the Tier 3 holders 19 pct, the newspaper said.
Eurotunnel is understood to have told Oaktree and Franklin that the
restructuring plan, carried out under the French courts' "safeguard" procedure,
supersedes earlier agreements, it said.
The Paris commercial court will decide later this month whether to approve
the restructuring agreement, which has been backed by senior lenders, and also
by suppliers and employees.

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