Railtrack funding under threat

Railtrack's efforts to raise money could be under threat

Railtrack could face problems trying to raise much-needed funds of £2-3bn on the financial markets.

The company has lost the confidence of investors in the City because of the uncertainty over its finances, according to a report in the Financial Times on Monday.

Sir Alistair Morton, the chairman of the Strategic Rail Authority, was quoted as saying that Railtrack's plan to raise funds could be under threat unless the government provided more support for the rail industry.

"If the government says you can't assume that Railtrack is sovereign credit, given Railtrack's present condition... I don't see how it can raise it," he said.

Sovereign status would improve that rate at which Railtrack could borrow money, because the company would be seen to have the backing of the government.

Rocky bond market

The current state of the bond markets will also have an impact on the company's aspirations, as they has been shaken up by falling stocks and the economic slowdown.

According to bond experts, companies that are perceived as "risky", such as Railtrack, will have an even harder job trying to raise money.

Railtrack is preparing for an annual general meeting on Tuesday, where shareholders will no doubt air their grievances over the management's handling of the rail renewal programme.

The company has also been criticised for a series of hefty bonuses it has awarded to company directors, including its former chief executive Gerald Corbett.