CSFB in the frame to advise on UK Royal Mail restructuring

CSFB, the US investment bank, has emerged as frontrunner to advise the Department of Trade and Industry over a financial restructuring of the cash-strapped Royal Mail.

Executives at the postal group are planning to lodge their proposals for a pounds 2billion rights issue with the bank before Christmas.

Although a rights issue is not the only option being proposed to resolve the postal group’s funding problems, “it is the blindingly obvious first choice,” a source said.

Under the restructuring, the Government would take an increased stake in Royal Mail in return for providing more funds, with 20pc of the shares allocated to employees.

The organisation hopes to have a deal in place by the end of February, when the new regulatory settlement is due to begin.

The DTI held a beauty parade of advisers last week.

Earlier this year CSFB was appointed to advise the Government on Royal Mail’s pounds 2.5billion pension deficit.

Annual contributions to the pension fund are about pounds 450m a year, but may have to rise to about pounds 800m to plug the hole.

Neither the DTI nor CSFB would comment on Royal Mail’s restructuring.