European Infrastructure Finance Yearbook - Investing In Bonds ...

TRANSPORTATION INFRASTRUCTURE
70 ■ NOVEMBER 2007
Transaction Background
In November 2006, Eurotunnel’s junior- and
senior-secured bank debt holders and trade
creditors approved a restructuring proposal to
reduce the company’s debt from £6.20 billion to
£2.84 billion. The plan was put forward under
the French “procédure de sauvegarde” granted on
Aug. 2, 2006, by the Paris commercial court, to
Eurotunnel and 17 related entities. This was
followed by the approval of bondholders on Dec.
14, 2006, the approval of the Paris commercial
court in January 2007, and a successful share
exchange in May 2007.
Standard & Poor’s considers the proposed new
financial structure as offering a credible base for
future operations and a sustainable leverage.
The Concession Agreement
The Concession Agreement (CA) was signed on
March 14, 1986 by the states and the
concessionaires, under the Treaty of Canterbury.
The CA expires in 2086. Initially entered into for
a period of 55 years, the CA was extended by 10
years and then 34 years in 1994 and 1999.
Under the terms of the CA, the concessionaires
have the right and the obligation, jointly and
severally, to design, finance, construct, and
operate Eurotunnel (the “Fixed Link”), and to do
so at their own risk, without any government
funds or state guarantees.
Transaction Participants
STANDARD & POOR’S EUROPEAN INFRASTRUCTURE FINANCE YEARBOOK
Tariffs and commercial policy
The concessionaires are free to set their tariffs.
However, they must not discriminate between
users, notably with regard to their nationality or
direction of travel.
Penalties
Any failure by the concessionaires to perform
their obligations under the CA entitles the states
to impose penalties after a grace period.
Early termination of the CA and compensation
Each of the states may terminate the CA in the
event of a fault committed by the concessionaires
if, within six months, the concessionaires have
not remedied the relevant breach, and subject to
giving prior notice to the lenders of their right of
substitution. The CA defines a fault as a breach
of a particularly serious nature of the
concessionaires’ obligations under the CA, or
ceasing to operate the Fixed Link.
Each of the states may terminate the concession
for reasons of national defense. In this case, the
concessionaires may claim a compensation
governed by the law of the relevant state. Each
party to the CA may request the arbitration
tribunal, established under the Treaty of
Canterbury, to declare the termination of the CA
in exceptional circumstances, such as war,
invasion, nuclear explosion, or natural disaster. In
Transaction Participants
Borrowers The Channel Tunnel Group Ltd. (sterling tranches) and France Manche S.A.
(euro tranches)
Original lenders Deutsche Bank AG and Goldman Sachs International Bank
Lead managers Deutsche Bank AG and Goldman Sachs International
Substituted entities Sub CLEF Ltd. (the English substituted entity) and Sub CLEF S.A.S.
(the French substituted entity)
Issuer cash manager and issuer account provider The London branch of Deutsche Bank AG
Security agent, note trustee, and issuer security trustee Deutsche Trustee Co. Ltd.
Facility agent The London branch of Deutsche Bank AG
Security trustee Deutsche Trustee Co. Ltd.
Principal paying agent and agent bank The London branch of Deutsche Bank AG
Borrowers’ hedge counterparties The London branch of Deutsche Bank AG and Goldman Sachs International
Total return swap counterparties Deutsche Bank AG, London Branch and Goldman Sachs International
Total return swap custodian Deutsche Bank Aktiengesellschaft
Issuer corporate services provider Wilmington Trust SP Services (London) Ltd.
Monoline providers AMBAC Assurance U.K. Ltd., FGIC UK Ltd. and Financial Security
Assurance (U.K.) Ltd.