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Thursday, 27 June, 2002, 06:35 GMT 07:35 UK
Q&A: What future for New Railtrack?
The shares of Railtrack Group have been re-listed on the London Stock Exchange, nine months after its subsidiary - network operator Railtrack - was put into administration. BBC business correspondent Russel Hayes explains what's behind the move.

All that's left of Railtrack Group is a husk - why bother to re-list its shares at all?

It does seem odd. Railtrack Group has now lost its main assets, the network operator Railtrack plc, and Phase 1 of the Channel Tunnel Rail Link.

But it is still a public company with 515 million issued shares.

Stock market rules require that, unless there is a compelling reason, shareholders should be allowed to buy and sell them.

Trading was suspended last October, because of the huge uncertainty caused by Railtrack plc being put into administration. Today's deal means that doubt has now been removed.

But with so little of the company left, what are the shares likely to be worth?

Its main businesses have gone, that's true.

But of course they've got cash for them, which is now in the bank.

There are also two assets left; a collection of prime development land around railway stations, and 350m in cash already in its account.

When you add that to the money it has received today, it comes to about 1.3bn, which is about 2.50 a share.

So will they actually sell for that?

Not a chance.

Railtrack Group can't continue as a company, so it's plan is to also sell its property portfolio and close itself down - so it can hand the 2.50 a share back to shareholders.

But the first instalment will not be received until January 2003.

In the meantime, uncertainties over how much the property will sell for, possible legal action from shareholder groups and other liabilities, mean they'll be worth considerably less.

Who would possibly want to buy Railtrack shares?

Anyone who thinks they can make money out of them.

Provided the price doesn't fall much below 2.25, quite a few shareholders will probably decide it's worth cashing-in now rather than waiting until November for a possible 2.50.

That would create an opportunity for anyone who thinks the money they could make by buying now and holding the shares until the pay-out is worth the risk.

In reality this means hedge funds and other professional investors.

But if the price is much above 2.25, then the profit would not cover the commission or the risk.

That's why it's expected the shares will trade in a range of 2.25-2.30.

How does the government justify subsidising the deal after pledging that it wouldn't?

The then Transport Secretary Stephen Byers got into a real hole over this one.

Whether his decision to place Railtrack into administration brought down Railtrack Group is a hotly debated point.

But it did lead to the suspension of the shares, and howls of protest from shareholders, worried that they had lost most of their money.

It also severely damaged the government's relations with the private sector, at a time when ministers were relying on it to finance many new public sector projects.

So after initially saying there would be no taxpayers' money to help shareholders, Mr Byers relented and put up 300m to help Network Rail buy Railtrack.

A blatant U-turn? No, he said.

The money would have been spent anyway on court cases and the costs of keeping Railtrack in administration which are about 1m a day.

The government's critics though say the money is a bribe, to try to repair its relations with the city.

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