France is preparing plans to pump new funds into debt-laden France Telecom SA without breaching European Union rules against state bail-outs. Leaks in the French press suggest that it plans to create an "ad hoc structure" to hold the government 55% stake in the company, which could then borrow from banks to have the funds to participate in a rights issue to raise around 15bn euros ($14.7bn).

Because the money will be raised from the private sector, it hopes to satisfy the EU. In practice, of course, the banks will only lend to the new entity because it effectively has a government guarantee.

France Telecom's new chairman Thierry Breton said earlier this month that he would need two months to draw up a refinancing plan for France Telecom SA, which has debts of 69.7bn euro ($68.3bn) debt.

Ironically, France Telecom was only able to build up debts of this scale, during a vast acquisition spree, because it was majority-owned by the French government.

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