Eurotunnel announced today that it is applying for legal protection from its creditors after talks aimed at avoiding the company's bankruptcy ended without agreement.
The heavily indebted channel tunnel operator had set a deadline of midnight on Wednesday to reach a deal over the restructuring of the company in order to cut the £6.2 billion it owes to creditors in half.
The Anglo-French company had warned that its insolvency was a real possibility if a deal was not reached on the restructuring proposals which were agreed in May with the majority of Eurotunnel's lenders, including Goldman Sachs and Barclays.
Following the collapse of talks over the restructuring agreement, which broke up in the early hours of this morning, Eurotunnel announced that it had asked a French court to freeze its debts in order to allow the company to continue operating while a court-appointed administrator seeks to formulate a survival plan for the firm.
"Eurotunnel is now forced to pursue legal proceedings to place itself under the protection of the commercial court of Paris," Eurotunnel said in a statement.
The company claimed that a dissident group of creditors led by Deutsche Bank was responsible for the breakdown of the talks after backing an alternative restructuring deal to that favoured by Eurotunnel.
"I fail to understand how an institution such as Deutsche Bank has maintained its unreasonable demands without taking into account the consequences on the 2,300 employees and 800,000 shareholders of Eurotunnel," said the company's chairman, Jacques Gounon.
Eurotunnel's financial problems date back to the construction of the Channel Tunnel, which was completed in 1994.
About £9.8 billion was spent building the tunnel, but Eurotunnel has struggled to recoup costs as a result of lower than anticipated traffic levels.