Railtrack 'needs £6.8bn over 5 years'

Railtrack's accounts could be creaking even worse than feared

One of the main potential private sector bidders for rail operator Railtrack could be pulling out after finding a funding gap of £6.8bn over the next five years, according to UK papers.

The Financial Times reported that Swiftrail UK, the consortium backed by German bank WestLB, has found a huge shortfall between projected income and expenditure for the insolvent operator.

And according to the Times, Swiftrail may now decide not to go ahead with a bid for Railtrack, now in administration.

Instead, the paper said, it might decide to back the government's preference for a non-profit owner - or "company limited by guarantee", Transport Secretary Stephen Byers' favoured term.

That could bring an end to the administration process in six months.

If, in contrast, the bidding process goes ahead, the Financial Times said, administrators Ernst & Young do not see a resolution until late in 2002.

The paper said E&Y had told Swiftrail that it would take three months to give them initial access to data, another six months to complete due diligence and a further three to evaluate any bid properly.

Mixed messages

Railtrack was pushed into administration by Mr Byers on 7 October, on the grounds that it was insolvent.

He said the company's indebtedness was spiralling out of control, and that simply pumping more public money into a private company would be unacceptable.

But Railtrack's former executives continue to insist that the government turned off the funding tap too early, forcing the company into an early bankruptcy and robbing shareholders.

Mind the gap

The admission of the funding gap is likely to provide ammunition for both sides in the ongoing row over whether the government was right to pull the plug on Railtrack.

The company's parent, Railtrack Group PLC, are likely to say that the shortfall is proof that the government was stinting the company of money it needed to do its job.

But the company's critics will seize on the revelation as clinching evidence that Railtrack's finances were out of control.