S&P cuts Eurotunnel loan to D

Standard & Poor's said it lowered Eurotunnel SA's £240 million senior secured bank loan due 2012 to D from C and removed the rating from CreditWatch, where it was placed with negative implications on Feb. 9, 2004.

The £700.05 million of C-rated senior secured, subordinated and junior subordinated notes issued by related special-purpose vehicles Fixed-Link Finance BV and Fixed-Link Finance 2 BV remain on CreditWatch with negative implications.

S&P said the downgrade follows the company's default on the scheduled interest payment of about €350,000 on a tranche of the senior secured bank debt on Wednesday. On Aug. 2, the Paris court granted the request that Eurotunnel and 17 related entities be placed under the protection of the French law, "procedure de sauvegarde." Eurotunnel confirmed it has sufficient cash to make the payment, but under the safeguard proceedings Eurotunnel is stayed from making the interest payment.

Fixed-Link Finance and Fixed-Link Finance 2 do not fall under the "procedure de sauvegarde," but they will also be affected by the stay on debt payments at Eurotunnel during the safeguard proceedings, the agency said. Fixed-Link Finance 2 has no dedicated liquidity facility available, and its next debt payment is due in February 2007. Fixed-Link Finance also has a debt service payment due in February 2007, but it has dedicated reserve facilities available, so S&P said the risk of an imminent default at Fixed-Link Finance is lower than at Fixed-Link Finance 2.

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