The decision means that the Channel Tunnel rail group has accepted that some of its bonds will convert to shares.

Jacques Gounon, chairman and chief executive of Groupe Eurotunnel, said: “We have three full years in which to refinance – until August 2010, so I am not in a hurry. I would prefer to raise the full amount in three years’ time in a single capital raising, rather than try to raise a small amount in such bad markets.”

To buy back all the notes redeemable for shares, Eurotunnel would need to raise €1.6 billion (£1.1 billion). It had intended to begin the capital raising in January, but the troubles in the markets would make it difficult and expensive to do so.

However, by deferring the plan, 5 per cent of one third of loan notes will convert to shares in August next year, and a further 5 per cent in 2009. “We are accepting that there will be some dilution of the shares,” Mr Gounon admitted.

A review will take place later next year and if it is then considered possible to raise the entire amount in one go, the group could go to the market a few months later.

“We know there are a significant number off shareholders who want to participate in a rights issue, but we would rather hold off until the credit crunch disappears,” Mr Gounon said.

Eurotunnel said that it would launch a 1 for 40 share consolidation on November 12. Once the share consolidation has been achieved, the company is expected to try to attract more institutional investors, who have largely shunned the stock since its restructuring.

The group’s revenues climbed 10 per cent to €214.2 million on a pro forma basis for the first nine months of 2007. Car traffic through the tunnel was up 7 per cent on the first nine months of last year, while lorry traffic was up 10 per cent. The figures were helped by a buoyant summer market and the boost provided in the past month by the Rugby World Cup.

Revenue from rail passengers also rose, largely because of an increase in Eurostar passengers. Freight volumes passing through the tunnel on other companies’ trains were disappointing, falling 25 per cent in the quarter, but Eurotunnel said it is to unveil a new strategy for developing rail freight.

“A favourable climate in the third quarter has enabled us to consolidate Eurotunnel’s substantial and consistent growth since the start of the year and 2007 looks set to be an excellent year,” Mr Gounon said.

Challenge from New York

Two US hedge funds are suing Eurotunnel because they are unhappy that the company was restructured under French insolvency law this summer.

Elliott Advisors, an arm of New York hedge fund Elliott Associates, and Resurgence Asset Management, both based in New York, were among creditors of the Channel Tunnel group that believe they would have received more in the British courts.

Eurotunnel said that the first part of the litigation, which will reexamine whether the group was mainly a French business, will open in the next few weeks in a Paris court. The company is confident that it will overturn the case brought by the US hedge funds.

“I am fully comfortable with this litigation,” Jacques Gounon, chairman and chief executive, said. “They have discovered that French law is different from UK law so if you are doing your job you can use some levers in French law, which has been a big surprise for them.”

The legislation under which Eurotunnel was restructured – the Procedure de Sauvegarde, the Gallic equivalent of America’s Chapter 11 - was only introduced to the French legal system last year and this was its first major application.