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| Eurotunnel hits the buffers |
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| Wednesday, 20 June 2007 | |
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The buffers in question are very angry members of the British establishment. After a perfect performance guiding Eurotunnel through the perils of a difficult reconstruction, French Chairman Jacques Gounon seems to have taken his eye off the ball at the last moment. Just as the company was rallying shareholders for a crucial vote to approve the rearrangement of the company’s affairs and get rid of billions of debt, a bitter and seemingly pointless row has broken out with the 12,000 minority shareholders who have travel privileges granted up to 20 years ago. These privileges were attached to their shares because they were prepared to subscribe share capital before the tunnel was built, when the company was having trouble raising capital. They had to wait seven years before they were able to use the cheap travel they were promised. As a reward, those who were prepared to buy 1,500 shares could travel as often as they liked for one pound a trip so long as they kept their shares. However, their original investment is now nearly worthless. Lower investments attracted lesser privileges. On January 19, a circular to UK shareholders declared that travel rights would be preserved in the reconstruction of the company. This involves the takeover of Eurotunnel's assets by a new company which will pay off the new agreed lower level of debt. This followed the decision by the Paris Commercial Court three days earlier, approving the scheme which cuts the company’s £10 billion debt in half. However, when the formal documents reached shareholders, it was discovered in the small print that existing travel rights had been replaced by a new scheme only allowing three trips a year with a 30% discount; and this scheme could be withdrawn in 2010. Challenged by the UK shareholders consultative committee about the change, Eurotunnel claimed that its hands were tied and that it had no choice in the matter as the British Takeover Panel had insisted on the change. Enquiries to the Takeover Panel revealed that this was not the case. The company then let it be known that it was the French equivalent of the Takeover Panel – the AMF – that was the cause of the problem. Enquiries revealed that this too was incorrect. The chairman then said, through a spokesman, that the problem was contained in the terms of the judgement of the Paris Commercial Court. Lawyer members of the Consultative Committee studied the judgement and found no grounds for this statement. A further statement then claimed that the legal agreement granting the privileges in 1987 was defective. This too appeared to be incorrect. While all this had been going on, the shareholders formed a committee to fight for their rights – Eurotunnel Foundation Shareholders Action Group (ETAG). In an interview with 'The Times' of April 17, Chairman Gounon contemptuously dismissed shareholders protests as “crazy”. “The life of the company is at stake. If the exchange offer is unsuccessful we are dead. There is no room for litigation, when the court decided there should be one category of shareholder, this free privilege was killed.” He pointed out that over the last 10 years the shareholders could have recovered their investment with free travel. Apart from these remarks, to date the company has made no formal statement justifying its actions. However, already Eurotunnel has had to eat some of its chairman’s words. By order of the AMF, the wording of the offer to shareholders has been altered, to make clear that accepting the proposal in the new company means giving up the travel privileges, whereas keeping the old shares does not. Michael Stainer of ETAG says that if the reaction of the foundation shareholders has any negative effect on the company, “Monsieur Gounon has only himself to blame”. Another shareholder, Martine Gillet, told French News: “This is a very strange business – Eurotunnel is fighting about nothing at the worst possible moment. Gounon claims the cost to the company of travel privileges is £200,000 but he has not even initiated the index-linked £10 annual registration charge originally envisaged in 1987. If he did he could recoup £240,000 a year. Not only that, only when trains are full can the travel privilege be said to cost the company anything at all. Mostly shareholders only travel two or three times a year, filling empty space and bringing business to the Eurotunnel termini. He forgets that many of the people who bought these shares 20 years ago took a big risk in exchange for the travel privileges. Many of them are now in highly influential positions. It is not so much the money, it is the principle.” Among the foundation shareholders who took up the maximum of 1,500 shares in exchange for the right to travel for £1, several have become members of the House of Commons, a number are members of the House of Lords. Others include the former British Ambassador to France, Sir John Fretwell, and the daughter of Lord Pennock, a former Chairman of Eurotunnel. Others are solicitors, barristers, accountants and leading members of the City establishment. A £1 million fighting fund has already been set up. A team of top lawyers has been assembled. A letter before action has gone to Eurotunnel and unless the company backs down soon, an injunction suspending the reconstruction will be sought. A battle royal will then take place between the Gallic cock and the British buffers. Whatever the result, it will not be good for Eurotunnel. by Robert Harneis |
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