Railtrack board has its say as shares are suspended
Shares in Railtrack, Britain's troubled privatised rail infrastructure company, were suspended on Monday after the High Court in London on Sunday appointed Ernst & Young, the accountants, as administrators when the company accepted it could no longer pay its bills.
But the board issued a feisty statement saying Railtrack and the government had been in negotiations about funding from June, when John Robinson was appointed chairman, until the end of last week, "with no indication from the government that it intended to take the actions which have now transpired".
Railtrack "reluctantly accepted that there was no credible alternative to administration", said the statement.
The board has appointed Deloitte and Touche to assess the consequences of administration on the parts of the group lying outside of Railtrack Plc.
The government said administration would continue until plans to create a not-for-profit company representing the government, industry and passengers have been put in place. "This is not renationalisation" said Stephen Byers, the transport secretary. "Railtrack is finished", he said, adding "The court's decision is the beginning of the end of Railtrack".
Mr Byers said government would meet the costs of Railtrack's trade creditors and servicing loans of £3.3bn ($4.89bn) until the new company is set up. No jobs are expected to be cut as a result of the move, although there are ongoing plans for an estimated 1,000 management redundancies.
However, investors are unlikely to get any compensation for shares. "I can say for certain there will be no taxpayers money made available to support shareholders," said Mr Byers.
There was also huge doubt cast over the future of the Virgin Trains west coast route modernisation contract, which has spiralled from £2.3bn to more than £7bn as of Sunday.
"The government will stand behind the rail system . . .What I am not prepared to do is to fund the poor performance of individual companies," said Mr Byers. The minister made clear that Mr Robinson is not blamed for Railtrack's failure and that it is hoped he will stay on to chair the new company.
Gordon Brown, chancellor of the exchequer, has ruled out further public bail-outs for the company being set up to succeed Railtrack, the Treasury said last night. Mr Brown hopes to avoid an extra drain on state funds at a time when economic prospects are uncertain and the war on terrorism is likely to cost hundreds of millions of pounds.
The Treasury has agreed to provide short-term loans to keep the company operating during the period of administration. These will be at commercial rates and will eventually be repaid.
However, the government confirmed that it would keep its commitment to invest £30bn in the railways over the next 10 years.
Don Foster, the opposition Liberal Democrats' transport spokesman, said Sunday's shake-up removed some of the question-marks that had been hanging over the 10-year transport plan. "The credit rating status of Railtrack was falling through the floor it was never going to be able to achieve the west coast and east coast upgrades. Now at least with a new vehicle it has a better chance, and it's a vehicle we should have had in the beginning."
Eric Pickles, opposition Conservative transport spokesman, said the government was partially responsible for Railtrack's demise. "They are responsible for creating an adversarial climate by setting Railtrack, the Strategic Rail Authority and the regulator at each others' throats."
Financial Times
