EUROTUNNEL will go bust if shareholders reject a debt restructuring deal later this month, its boss has warned.

The Channel Tunnel operator has launched a hearts and minds offensive to persuade them to back the plan and stave off bankruptcy.

A letter from chief executive Jacques Gounon was sent to all 350,000 shareholders, mostly French, urging them to back the complex deal.

The plan halves Eurotunnel’s debt from £6.2bn to £2.9bn by a combination of write-off, longer repayment times and potential debt-for-equity swap.

Eurotunnel is trying to persuade them that some repayment is better than none if the company goes bust.

A source said: "Simply piling more debt on Eurotunnel will one day break the camel’s back."

Eurotunnel’s financial woes stem from cost overruns when the tunnel was built and the insistence by the then Government that no public money should be pumped into the project.

Under Eurotunnel’s plan, all creditors, bondholders and shareholders will share the pain, but some claim they will suffer more than others.

"If we want to save the company, there is no alternative, " M Gounon said during a visit to Kent.

It was the right plan with the best balance for all stakeholders, he claimed.

However, the plan is opposed by German financial institution Deutsche Bank, which claims it favours larger stakeholders at the expense of smaller ones.

Smaller shareholders are unhappy at what they believe will be a meagre return for their investment. Some could see the value of their investment fall by as much as 87 per cent.

Their influence is considerable. Urged on by financial journalist Nicholas Miguet, they voted out the previous Kent-led board two years ago in a so-called French revolution. It cost Richard Shirrefs, the former chief executive, based in Canterbury, his job.

Eurotunnel has taken drastic action in the past two years to slash costs.

This is made even more crucial in November when a £70m "minimum usage charge" paid by Eurostar and other rail operators is scrapped.

A loyalty scheme for hauliers guaranteeing annual custom, and the scrapping of under-used services has boosted margins.

The company axed 900 jobs in Cheriton and Coquelles, about 450 at each site.

M Gounon said there should be no need for further job losses if the company is "fully stabilised".