Eurotunnel yesterday said it would seek an extension for talks with creditors over its debts of more than £6 billion and warned it could not guarantee the future of the group beyond this year.
The Anglo-French firm said it had decided to request from creditors the opening of a new "waiver" period over its debts to allow talks to continue until July 12, with a review planned in mid-May.
The company added it had extended its financial report-ing deadline, and only provided provisional results figures for 2005.
It said the provisional results showed a four per cent improvement in its operating margin and a 19 per cent increase in trading profit to £153 million.
Chairman Jacques Gounon also said that Eurotunnel estimated its net loss last year was slightly above 300 million euros, compared with a 2004 loss of 836 million euros.
But Eurotunnel reported in January that its revenue last year rose just one per cent to £541 million.
And yesterday it said revenues in the first three months of 2006 were also little changed at £131.5 million, down from £131.6 million in 2005.
Eurotunnel's shares in Paris fell as much as 10.5 per cent while the stock lost as much as 4.2 per cent in London, although both sets of shares later recovered ground.
When the tunnel railway opened in 1994 Eurotunnel's shares were trading above the 400 pence level in London, but the stock's value has been gradually eroded over the years as its mounting debt continued to weigh.
Founded in 1986, Eurotunnel's problems stem from the soaring costs of digging the tunnel linking Britain and France and subsequent delays in getting the train services going.
It quickly emerged after the Channel Tunnel's official opening in May 1994 that it might not make enough cash from tunnel users such as freight operators and Eurostar to service its debt payments and the business was also hit by the tunnel being shut two years later after a fire on a truck shuttle train.
Eurotunnel said on Wednesday that while its o perating results were expected to improve, the results would still fall short of the level required to meet its schedule for repaying its debt which is due to start in 2007.
Last year Eurotunnel announced 900 job cuts in an attempt to reduce costs.
"Eurotunnel is undergoing a profound reorganisation which is generating a substantial improvement in operational performance," Gounon said in a statement.
"But beyond this positive new dynamism we cannot guarantee the future of the group in 2007, unless there is a global financial restructuring," he added.
Eurotunnel's committee of creditors comprises the European Investment Bank, Franklin Mutual Advisers, Ambac, MBIA and Oaktree Capital Management.
Combined, they represent 73 per cent of Eurotunnel's co-financier debt. The committee is advised by investment bank Rothschild.
"Our preference is for an agreed capital restructuring that must be based on economic reality and existing legal obligations," said a source close to the committee of creditors.
"We will examine details of the waiver request and inform the company of our decision in due course." He declined to say when a response would be forthcoming.
Gounon said that agree-ment over a debt restructuring was possible by mid-May, and added that Eurotunnel saw no payment default problems for at least 12 months.
In 1997 the company repackaged its debt into layers, or tranches, ranging from senior debt down to very junior debt which had very little chance of ever being fully repaid.
Then in 2001 there was a deal to buy back some of its own debt from its creditor banks, issuing new bond debt in the process.
The result is a complicated capital structure of highly traded debt, and an investor base that includes so-called vulture funds which target assets in struggling companies. Shares closed up 1/2p at 241/2p. ..SUPL: