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Capital Markets

Whole business securitization: £6.2 billion under the sea

Time is running out for Eurotunnel as it tries to refinance its debt.

Eurotunnel was last refinanced some four years ago when Fixed-Link Finance 2 conducted a whole business securitization for £740 million ($1.39 billion). That trade cut net debt by £400 million and put in place longer-term funding with an MBIA credit-enhanced tranche of £620 million and a junior debt piece worth £120 million. The debt for equity swap that took place in 1998 was an ugly affair and left the remaining shareholders, junior debt holders and senior debt holders all with a say in how any future restructuring took place.

It is forecast that Eurotunnel will run out of cash around the end of this year so urgent negotiations are taking place over its future. Although this is a viable company, it cannot service its £6.2 billion debt pile. And yet the answer to this problem this time, if the company’s management is to be believed, is in another refinancing. Much talk has centred on a Goldman Sachs and Macquarie led consortium negotiating with the most senior debt holders (Adhoc Committee led by MBIA). Rumours in the market estimated that this deal would put in place something like £2.55

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