LONDON, May 9 (IFR) - Eurotunnel is attempting to reduce its
debt servicing costs by taking advantage of favourable market
conditions, announcing plans to refinance the floating rate
portion of its securitised debt pile.
Groupe Eurotunnel, the concessionaire of the Channel Tunnel,
mandated Deutsche Bank and Goldman Sachs to arrange pan-European
investor meetings from May 11 to 16, with pricing expected
The company undertook a whole business securitisation in
2007 just as the financial crisis took hold, a £2.84bn long-term
debt structure from Channel Link Enterprises Finance that it
could pay off over the life of its concession to operate the
The refinancing has been several years in the making.
"Eurotunnel have tried to get this deal done recently, but
couldn't get it away I heard ... let's see how it works out," an
investor said on Tuesday.
Eurotunnel said in December 2015 that it had removed various
monoline wraps, part of the original structure, to make a
refinancing of its floating rate debt possible.
The issuer hit the road last spring to raise its profile
among investors, though the Brexit vote delayed its market
comeback. The conclusion of the French presidential election has
now cleared the path.
The 2007 issue was made up of £1.67bn and €2.12bn of fixed,
floating and index-linked bonds, with final maturities ranging
from 35 to 43-years.
Eurotunnel is now lining up a multi-tranche offering.
It plans to refinance the Tranche C debt with three tranches
of fixed debt with expected maturities of 5 and 10-years (for
€953m in aggregate) and of 12-years (for £350m), which will
revert to floating until their final maturity in 2050.
It will also require the partial unwind of the interest rate
swaps put in place in 2007, the cost of which will be funded by
new 33-year fixed rate debt in sterling and euros.
The amount of the consolidated new tranche C debt is
expected to be close to €2bn.
Eurotunnel said it expects this to result in a very
significant reduction in the average cost of its debt for at
least the next five years, the tranche C having an effective
interest rate of 8.39%.
The unique nature of the Channel Tunnel limits the pool of
comparables, particularly in euros. French toll roads are one
contender, but Eurotunnel would likely come wider. Heathrow
airport offers one of the best comps in sterling.
(Reporting by Alice Gledhill; editing by Alex Chambers)