Eurotunnel Suspends Interest Payments : Finance: Anglo-French firm seeks governments’ help. It faults duty-free profits enjoyed by ferries.

Eurotunnel, the Anglo-French company that operates the rail and auto tunnel under the English Channel, suspended interest payments to its banks Thursday and asked for government help.

Eurotunnel said it agreed with its banks to freeze interest payments on its debt, now equivalent to $12.1 billion, for as many as 18 months while it works out a long-term financing deal with creditors.

It also said it was seeking help from the British and French governments, either financial or otherwise.

The tunnel, built with private funding at the urging of former British Prime Minister Margaret Thatcher, has been unable to generate the revenue Eurotunnel needs to repay its huge debt.

Eurotunnel said it needs to offset what it believes is an unfair advantage for channel ferry operators, which make a big slice of their profits from duty-free sales and can therefore charge lower prices than Eurotunnel.

Bankers say Eurotunnel has no chance of becoming commercially viable without a major overhaul of its balance sheet.

Eurotunnel said it suspended interest payments in full agreement with its 220 banks after encouraging traffic figures in the summer failed to make up for a shortfall in funding.

However, the company’s British and French co-chairmen stressed that the tunnel, which opened last year, would continue to operate.

Patrick Ponsolle, the French chairman, said that Eurotunnel would seek financial help from the British and French governments. He also complained that government action until now had done nothing but hinder the success of the project.

He cited tough safety standards imposed by governments, the failure of the British government to build a high-speed train line between London and the tunnel entrance, and the continuation of duty-free sales on ferries.

Under European Union rules, duty-free sales were originally due to be scrapped in 1992 with the opening up of European borders, but the date has been extended until 1999.

A Eurotunnel source said the operator, which lost a previous court battle to stop duty-free sales on Channel ferries, was preparing a new case.

“The two governments cannot allow competition to continue which is systematically unfavorable to Eurotunnel,” Ponsolle wrote in an article in the French daily Le Monde.

“We think that the two governments should give us financial support much greater than has been the case up until now,” Ponsolle said.

Eurotunnel Financial Director Graham Corbett said later that the help given to the company need not necessarily be in cash, but that governments could act to correct distortions in competition between Eurotunnel and ferry operators.