European Infrastructure Finance Yearbook - Investing In Bonds ...

such cases, in principle, no compensation is owed
to the concessionaires. However, the states may
pay the concessionaires an amount representing
the financial benefits, if any, that they may derive
from the termination.
Any termination of the CA by the states, other
than in a situation described above, gives the
concessionaires the right to payment of
compensation. This compensation is for the entire
direct and certain loss actually suffered by the
concessionaires and attributable to the states,
within reasonably estimated limits at the date of
the termination, including damage suffered and
operating losses.
Substitution
Article 32 of the CA provides the lenders with
step-in or substitution rights to allow the transfer
of the concession and the assets required to
operate the concession to two entities owned by
the issuer. Step-in rights are triggered by certain
predefined events including a payment default
under the loan, an insolvency-related event
regarding the concessionaires, or if it appears
from an objective test that the estimated final
maturity date for repayment of lenders will be
materially extended.
The U.K. and French governments, through a
series of government letters, have confirmed that
the issuer is a “lender” for the purpose of
substitution, and that the rights to operate the
fixed link will be transferred to one French and
one English substitution entity.
This right of substitution would in any case be
subject to French and U.K. government
confirmation that the substituted entities have
the technical and financial capabilities to
undertake substitution--a process that can take up
to two months.
In addition, under the provisions of intercreditor
arrangements, the issuer (and hence the
noteholders) always maintains at least 51% of the
vote in any creditors’ committee, allowing the
creditors to retain control of any future
insolvency/restructuring process. This ensures the
ability to effect its step-in rights.
Transaction Characteristics
The debt restructuring details
The proposed Eurotunnel refinancing plan is
structured around the existing concessionaires
entering into a new long-term senior loan of
STANDARD & POOR’S EUROPEAN INFRASTRUCTURE FINANCE YEARBOOK
TRANSPORTATION INFRASTRUCTURE
£2.84 billion, and the incorporation and
formation of a new French holding company
which, through an exchange tender offer, holds at
least 93% of the current Eurotunnel group. The
proceeds from the debt restructuring, as approved
by the safeguard procedure, were used to repay
Eurotunnel’s senior debt, Tier 1A, Tier 1, and Tier
2 in cash at 100% of par including accrued
interests (£892 million); to finance a cash
payment to the holders of Tier 3 junior debt
facilities; and to pay certain fees, costs and
expenses related to the debt restructuring,
including any interest accrued on existing
Eurotunnel facilities.
A subsidiary of Groupe Eurotunnel S.A. issued
£1,275 million of notes redeemable in Groupe
Eurotunnel S.A.’s shares (NRS) that were offered
to the Tier 3 debt holders in exchange for their
existing £1.78 billion of lendings, and to the
bondholders in exchange for their part of the
debt. NRS were issued in addition to a cash
element paid to both parties. NRS convert into up
to 87% of the common equity over three years;
they are structurally and contractually
subordinated to the senior debt. The dilution may
be lessened, however, by the exercise of warrants
issued to existing shareholders and bondholders,
and the company’s ability, depending on its future
operating performance, to repurchase the hybrid
notes at a premium through proceeds from rights
issues, or through the issuance of an additional
Chart 1
Channel Link Enterprises Finance PLC
Debt Restructure Summary
NOVEMBER 2007 ■ 71