Eurotunnel issued two transactions that involved wrapped tranches: the £432 million ($843 million) and €745 million Fixed Link Finance (FLF) 1 in December 2000 and the £740 million Fixed Link Finance 2 in May 2002. FLF 1 was backed by tier 1, 2 and 3 debt while FLF 2 was backed exclusively by tier 1 debt. MBIA wrapped bonds in both FLF1 and FLF2 and took senior Eurotunnel debt, and its aggregate exposure to the credit at the end of last year was $2.2 billion gross par and $1.6 billion net (of reinsurance) par.
Eurotunnel received final legal approval for its restructuring plan on January 15. Under the terms of the plan all tier 1 and tier 2 loans will be repaid while the tier 3 loans will incur a loss. FLF 1 has sufficient reserve funds to meet interest and principal payments in the short term and remains outstanding. But the lack of reserve funds in FLF 2 means that under the latest restructuring plan the bonds are to be redeemed once the plan is in place.
FLF 2 comprises a senior £620 million tranche wrapped to triple A by MBIA.
