Railtrack deal: tell us what you think

Network Rail says profits will go back into the business

Railtrack shareholders are to get between £2.45 and £2.55 per share, under a rescue deal which has just been announced.

That's about 30p per share less than they paid - but a great deal better than the compensation which many investors had feared.

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Background

Railtrack Group will hand over the railways to a new state-backed firm called Network Rail for £500m.

Shareholders - who were once told they would get no compensation after Railtrack's collapse - are expected to get a 250p per share.

The new agreement will see Network Rail - a company made up of train operators, rail unions and passenger groups - as the new owners of the rail network.

Priority for passengers

The deal is also expected to see the company paying £295m for the first phase of the Railtrack-owned Channel Tunnel high-speed rail link.

Following the sell-off, shares in the remnants of the Railtrack Group are likely to be re-listed on the London stock exchange.

That will give investors the first chance to sell their stock since Railtrack was forced into administration by the former Transport Secretary Stephen Byers last October.

Network Rail has promised the new company will be "dedicated to the interests of rail users".

Unlike Railtrack, any profits will be ploughed back into the business rather than being split between shareholders as dividends.

And management incentives will be tied to performance targets such as safety and punctuality rather than profits.

Network Rail is in the final stages of negotiating with a syndicate of banks for a £9bn bridging loan, and will take on £6.5bn of Railtrack debt.

And, according to a Sunday press report, the government will then provide a further £10bn as a back-up.

Back to market

The 250p which sources say shares in the remnants of Railtrack will be re-listed at is the same amount as the compensation being offered to shareholders.

And it is 30p below the price when Mr Byers pulled the plug on the troubled firm.

Railtrack shares once soared to £17 before beginning the steep decline that ended in administration following a series of train crashes.

Railtrack will be little more than a shell following the sell-off of its assets, and is likely to be liquidated before the end of the year.

The two deals are subject to approval by Railtrack shareholders at a general meeting expected in July.

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