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Monday, 25 March, 2002, 18:03 GMT
Railtrack investors 'to get money back'
Train
Railtrack was put into administration in October
A non-profit making body set up by the government to take over the work of Railtrack is set to announce on Monday how it is to compensate the company's 250,000 shareholders.

It is thought the offer will be funded in part by a government grant of 300m, despite repeated assurances by Transport Secretary Stephen Byers that no more public money would be offered to investors who took a risk.


The government has always made it clear there will be no compensation for shareholders

DTLR

The deal will give shareholders the bulk of their money back.

Company Limited by Guarantee or CLG, the non-profit making body set up by the government when Railtrack went into administration, is expected to offer to buy out the 250,000 shareholders.

Mr Byers has been under great pressure from financial institutions in the City of London to compensate shareholders, who could be offered around 250p a share - close to the 280p price when Railtrack went into administration in October.

The government has insisted that no public money will be used.

U-turn?

A report in the Sunday Telegraph says shareholders will be offered 500m, made up of a 300m grant from Mr Byers' department and 200m of private funds.

The plan has led to accusations that Mr Byers is performing a policy U-turn in backing the plan and 'bailing-out' the shareholders.

But a spokeswoman for the Department of Transport, Local Government and the Regions, said: "This is a matter for the CLG. The government has always made it clear there will be no compensation for shareholders.

"The government has said the shareholders should get the value in the company to which they are entitled."

'Prudent'

David James, a spokesman for Swiftrail - a consortium of banks which was drawing up its own bid to run Railtrack - said on BBC Radio 4's World This Weekend programme that the plan was "a prudent course of action" to avoid litigation which would hamper efforts to rescue Railtrack.

Shareholders and Railtrack's parent company, which is not in administration, have threatened to sue Mr Byers.

However, Mr James warned that "an enormous amount of additional financing" would still be needed to solve Railtrack's problems.

News that Railtrack shareholders may get some of their money back was welcomed by investor Paul Krebbs.

'Invested heavily'

He said: "I think it's important that there is compensation because I invested my small amount of money admittedly in good faith, to support the project and at least I must receive what I put in."

Transport Secretary Stephen Byers
Stephen Byers insists there will be no compensation
Peter Lawrence from the Railway Development Society - which campaigns for improvements in the rail network - said the offer would provide some hope to the rail workers who put their life savings into Railtrack.

He said: "Certainly this is a U-turn by Mr Byers and co.

"I think this will go some way to addressing the problem. Many shareholders, particularly former rail employees, invested heavily in shares in the former Railtrack organisation, and of course they're to lose a lot of money."

Shadow defence secretary Bernard Jenkin said the move represented a "humiliation" for the government.

"I think it was inevitable that they were going to have to take something to the shareholders...because the shareholders were basically cheated out of their money", said Mr Jenkin.

'Worse state'

Stephen Joseph, the director of transport and environment lobby group Transport 2000, expressed fears that paying off Railtrack shareholders could hurt long-term investment in the rail network.

He said: "I think that the problem is that if getting Railtrack out of administration means that lots of extra money is diverted into the pockets of the former shareholders of Railtrack, then that would take money away from the railway and will actually mean that the railways will be in a worse state."

Mr Joseph said such a scenario would anger all those people who had suffered from an under-funded railway system.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Simon Montague
"The hope is that paying now will produce bigger savings in public money later"
Simon Haslam, Railtrack Shareholders Action Group
"It is a very pleasant surprise"
See also:

21 Mar 02 | Business
Railtrack decision delayed
08 Mar 02 | UK Politics
Railtrack 'did not breach rules'
02 Mar 02 | Business
Railtrack to begin court action
06 Nov 01 | Business
No deal for Railtrack shareholders
15 Oct 01 | Business
Railtrack: What happens now?
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