The epic restructuring of Euro-tunnel is entering a key phase with the company filing for bankruptcy protection with the Paris courts after failing to come to an agreement with its creditors to reduce its £6.2bn debt.

The restructuring is a landmark transaction in the French insolvency market. The procedure de sauveguarde, which is the country's equivalent of a US Chapter 11, was only recently introduced in France and Euro-tunnel marks the first major test of the regime so far.

The French courts this week, however, delayed a decision on granting full protection until a hearing on 2 August.

The procedure would hand Eurotunnel chief executive Jacques Gounon the power to continue the business while the court tries to achieve the company's financial restructuring.

A raft of firms have taken lead roles on the negotiations.

Freshfields Bruckhaus Deringer, Weil Gotshal & Manges and Herbert Smith are advising Euro-tunnel, while Kirkland & Ellis, Cadwalader Wickersham & Taft and Debevoise & Plimpton are advising the senior creditors.

The investors are being represented by Clifford Chance and Sullivan & Cromwell.

In May, Eurotunnel put forward a preliminary agreement with the ad hoc committee, represented by Linklaters. However, the bondholders, represented by Allen & Overy and Latham & Watkins, rejected the proposal.

Both the senior creditors and the bondholders rejected a second proposal, which was more favourable to the latter but saw the former's future equity stake diluted.

The company may also file for insolvency, which could in itself cause problems as Eurotunnel runs two separate but linked companies operating out of France and the UK, making it unclear which legal jurisdiction will take precedence.

Simmons & Simmons insolvency partner Peter Manning commented: "It is such an unusual situation that in many ways it is hard to predict what is going to happen next.

"The debt set-up is complicated and many of the procedures are new. Any proposals will have to be agreed by the French and English Governments."

"There will be lawyers who have worked on Eurotunnel for all of their careers and who will still have work coming out of it for years to come."