31st May 2006 11:30
Eurotunnel PLC/Eurotunnel S.A.31 May 2006 31 May 2006 Presentation of the Preliminary Restructuring Agreement agreed between Eurotunnel and the Ad Hoc Committee Following 10 months of negotiations, on 23 May 2006, Eurotunnel signed a bindingPreliminary Restructuring Agreement with the Ad Hoc Committee. The restructuringplan is strengthened by a financing commitment from a group of financiers andinvestors comprised of Goldman Sachs, Barclays and Macquarie. The Agreement preserves, as far as possible, the interests of all the partiesinvolved. It is being presented to the other debt holders and will be presentedto Eurotunnel shareholders at the next General Meeting. The economics of this Agreement are as follows: - Debt reduction of approximately £3.3bn - A total "corporate" style debt of £2.9bn, made up of 3 tranches: new Senior debt, Tier 1A (FLF 2) and mezzanine ; - Listed hybrid notes for a nominal amount of £1bn, convertible from 2009 - The establishment of accretion mechanisms for the existing Eurotunnelshareholders: warrants and the possibility for the Group to buyback the hybridnotes. The financial restructuring, if accepted, will be implemented through theincorporation of a new French parent company which will, in autumn 2006, launchan exchange offer, in the UK and France, to holders of Eurotunnel Units. Appendix A more detailed presentation of the Agreement is attached below. Ndegrees 977/2006 For media enquiries contact:John Keefe on + 44 (0) 1303 284491.Email: [email protected] Ken Cronin on + 44 (0) 788 759 1499 For investor enquiries contact Xavier Clement on + 33 1 55 27 36 27.Email: [email protected] www.eurotunnel.com Eurotunnel manages the infrastructure of the Channel Tunnel and operatesaccompanied truck shuttle and passenger shuttle (car and coach) services betweenFolkestone, UK and Calais, France. Eurotunnel also earns toll revenue fromtrain operators (Eurostar for rail passengers, and EWS and SNCF for railfreight) which use the Tunnel. Eurotunnel is quoted in London, Paris andBrussels. Eurotunnel Preliminary Restructuring Agreement This note summarises the key elements of the Preliminary Restructuring Agreementexecuted by Eurotunnel with the members of the Ad Hoc Committee(1). This bindingagreement, which is subject to a number of conditions precedent, sets out theprincipal terms of the restructuring of Eurotunnel's debt which, once finalised,will be presented to its shareholders at the next General Meeting. This restructuring plan is strengthened by a financing commitment from a groupof financiers and investors comprised of Goldman Sachs, Barclays and Macquarie. The prime objective of the parties to the Preliminary Restructuring Agreement isto create the conditions for Eurotunnel to operate on a "normal" basis, at thesame time as taking account of the interests of the different parties. Theagreed structure provides a lasting solution to the problems encountered by thegroup since its creation by: • simplifying and unifying the existing corporate structure; • replacing the current "project finance" style debt structure by a "corporate" debt structure; and • significantly reducing the group's indebtedness and adapting theamount and duration to the specificities of the tunnel concession. The implementation of the restructuring plan is expected to be completed priorto 31 October 2006. Key features of the financial restructuring plan • The Preliminary Restructuring Agreement sets out the framework torestore and stabilize Eurotunnel's financial situation, with the objective ofreducing its indebtedness by approximately 54% from £6.20 billion(2) to £2.90billion. This reduced level of indebtedness is considered realistic in light ofthe duration of the concession and operating forecasts to ensure the group'sfuture and prospects for development and provides a balanced treatment of theinterests of all relevant parties. • The refinancing plan is structured around: (i) the incorporation of a new French holding company, which willbe at the centre of the restructuring and all of the transactions required forits implementation. The existing Eurotunnel shareholders will have thepossibility to become members of the new French holding company pursuant to anexchange offer (the "Exchange Offer"); and (ii) the simultaneous financing of the new structure by a group ofinvestors and financiers. • The key features of the financial restructuring are as follows: (i) incorporation of a new French holding companylisted in London and Paris. The share capital of the new holding company will becomprised of ordinary shares and one preferred share. The preferred share willbe held by a company controlled by the investors in the hybrid notes and wouldconfer specific governance rights, but no specific economic rights; (ii) implementation of an exchange offer in the UKand France pursuant to which the holders of Eurotunnel PLC and Eurotunnel SAUnits will be offered: • new shares in the new French holding company; • warrants entitling the holders to subscribe for additional shares inthe circumstances set out in paragraph (vi) below, in particular in the event ofadditional value crystallising in Eurotunnel. In addition, shares in the new French holding company offered pursuant to theExchange Offer will benefit from preferential tariffs for transport. The minimumacceptance threshold for the Exchange Offer will be 60%, subject to regulatoryapproval; (iii) the funding of a new Senior facility of anaggregate amount of £1.81 billion to France Manche SA and Eurotunnel Finance Ltdto refinance the Senior Debt, Fourth Tranche and Tier 1 and Tier 2 of the JuniorDebt. Tier 1A (£740 million) will be excluded from this refinancing and willremain in place under its current terms; (iv) issue by an English subsidiary of the new Frenchholding company (entirely controlled by the French holding company and havingits centre of management in France) of a mezzanine debt of an aggregate amountof up to £350 million, the proceeds of which will be used in part to refinancepart of the current Junior Tier 3 Debt and to compromise the StabilisationNotes, Resettable Bonds and Participating Loan Notes. Any remaining amount ofthe mezzanine debt will be used as working capital by the group, including topay costs incurred in connection with the implementation of the restructuring; (v) issue by the UK subsidiary of listed subordinatedHybrid Notes convertible into ordinary shares of the French holding company. Theissue of the Hybrid Notes will be underwritten by the new investors. The HybridNotes will be offered to the holders of the Tier 3 Junior Debt in exchange fortheir debt of £1.78 billion. The aggregate nominal amount of the Hybrid Noteswill be £1 billion or equivalent, divided in three tranches: T1- £500m,mandatory conversion on the third anniversary of their issue, T2 - £250m,mandatory conversion on the fourth anniversary of their issue, and T3 - £250m,mandatory conversion on the fifth anniversary of their issue. In addition, theHybrid Notes may, subject to certain conditions, be redeemed at the discretionof Eurotunnel by the payment of a redemption premium of 59.2%, increased eachyear by 7.5%; and (vi) the granting of claw back rights, in the form ofwarrants (referred to in paragraph (ii) above) issued to shareholders tenderingtheir Units to the Exchange Offer and to a lesser extent to holders ofStabilisation Notes, Resettable Bonds and Participating Loan Notes. Thesewarrants are intended to limit the diluting effect on the shareholders of theHybrid Notes upon the occurrence of certain events and enable their holders toparticipate in future value creation within the new French holding company. The restructuring plan provides for the extension of the maturity profile of allof the group's indebtedness to be more in line with the duration of theconcession. The group's indebtedness may also be refinanced, subject in certaincases (in particular its fixed rate debt), to the payment of an early redemptionpremium, enabling the group to benefit from any improvement in market conditionsand the company's credit rating following the restructuring. * * * Overview of the financial restructuring The restructuring plan is in respect of approximately £6.24 billion, estimatedto be the level of the group's debt as at 31 October 2006, the expected closingdate of the implementation of the restructuring. Estimated Principal Indebtedness as at £m Restructured Debt (1) £m 31/10/06 Senior Debt 366 New Senior Debt 1,810Tier 1A (FLF2) 740 Tier 1A 740Junior Debt T1 3,208Junior Debt Tier 2Junior Debt Tier 3Participating Loan Notes 860 350Stabilisation Notes 560 Mezzanine DebtResettable Bonds 464 6,198 2,900 (1) The structure of the capital following implementation of the restructuring alsoincludes the Hybrid Notes for a face value of £1 billion. The restructuring plan: • provides for the redemption in full of the principal amount plusaccrued interest of the Senior Debt (£237 million), the Fourth Tranche Debt(£129 million) and the Tier 1 Debt (£541 million) and Tier 2 Debt (£892million). Holders of Tier 3 Junior Debt will receive subordinated Hybrid Notesconvertible into shares of an aggregate principal amount of £1 billion, plus apayment in cash of £100 million in exchange for their debt of £1.78 billion; • does not affect the Tier 1A Debt (FLF2) which remains in place underits current terms. With the first repayment of principal not due until 2026,this does not affect the short term financial stability of the group; and • includes a mezzanine debt, the principal amount of which is notamortizable for 7 years and the unpaid interest of which will be capitalized. Dilution/Claw Back Rights The conversion of Hybrid Notes into ordinary shares of the new French holdingcompany will entitle their holders to up to 86.95652% of the share capital ofthe new French holding company on a fully diluted basis and following a completesuccess of the Exchange Offer. Under the terms of the agreement, the potentialdilution of holders of Units may be limited by: • the holders of Units accepting the Exchange Offer will receive freewarrants to subscribe for ordinary shares in the new French holding companywhich will entitle them to be the only shareholders benefiting from a part ofthe increase in value of the French holding company between 2008 to 2010 bybeing able to exercise the warrants with effect from 2011 at an exercise priceequal to the nominal value of the underlying shares (1 euro cent) and for anumber of shares proportionate to the increase in value and to which they areentitled; and • up to 40% of the Hybrid Notes may be redeemed at any time at theentire discretion of the Eurotunnel group, subject to the payment of an initialredemption premium of 59.2%, increasing each year by 7.5%. Any redemption ofmore than 40% of the Hybrid Notes must be made for all of the outstanding HybridNotes. The redemption of Hybrid Notes may be financed in one or more of thefollowing three ways: o additional indebtedness (debt or quasi-equity) up to a maximum of £225million; o share capital increase; and o direct market purchases of up to 5% of the outstanding Hybrid Notes inthe fifth year following their issue. • the Preliminary Restructuring Agreement specifically provides for thepossibility of dividends to be paid to shareholders: o following the payment of a first coupon of 6% to the holders of theHybrid Notes, subject to available cash flow, an additional 3% coupon shall bepayable to holders of Hybrid Notes and a dividend of an amount equal to theamount of the additional coupon multiplied by the sum of the number of shares inissue divided by the number of shares to be issued upon conversion of the HybridNotes in issue at the date of payment of the additional coupon shall be payableto shareholders; and o by the debt structure of the group becoming "corporate" in nature.Subject to complying with the various agreements reached with its creditors, inparticular concerning coverage ratios, the group will be entitled to retain itsfree cash flows and at the appropriate time use them in accordance with itscorporate interest, such as paying dividends to its shareholders. * * * Eurotunnel now intends to convince the subordinated debt holders to back thisPreliminary Restructuring Agreement. In parallel Eurotunnel will seek tostrengthen the financial refinancing package through inclusion of a wider groupof investors and financiers. Details of the full restructuring plan and theconditions to which it is subject will be presented to shareholders at the nextGeneral Meeting. A full description will be included in the documentationprovided to shareholders in connection with the Exchange Offer. The effective implementation of the restructuring plan is subject to thesatisfaction of a number of conditions precedent over the coming months. Theterms of the exchange offer are subject to regulator approval and couldtherefore be amended. Certain conditions depend on events and parties outsidethe control of the Eurotunnel group which may not be satisfied or may only besatisfied in a timeframe that is incompatible with the proposed implementationof the restructuring plan. In this case, Eurotunnel would have to agree with therelevant parties the necessary changes or modifications to be made to thecurrent plan. The implementation of the restructuring plan is expected to be completed notlater than the autumn 2006. -------------------------- (1) The Ad Hoc Committee represents the majority of the Co-financierdebt, it is composed of MBIA Assurance SA, European Investment Bank, FranklinMutual Advisers LLC, Ambac Assurance UK Ltd, and entities affiliated withinvestment funds managed by Oak tree Capital Management LLC. (2) For ease of reference, the amounts referred to in this pressrelease have been rounded and presented in £ sterling. The exchange rate used inthis press release is 1.4619 euro/£. The final amounts will be calculated byreference to the actual exchange rate. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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