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Monday, 24 June, 2002, 05:29 GMT 06:29 UK
Railtrack deal delayed
UK station
Network Rail has pledged to put customers first
Railtrack shareholders will have to wait until later this week to learn the details of a rescue package for the group, it has emerged.

The firm's administrators are poised to sell off key assets and give birth to the new firm that will take control of the UK's crippled railways.

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

It had been expected the deal would be announced on Monday.

But on Sunday night it emerged that sticking points over part of it - the group's anticipated offloading of phase one of its high-speed rail link for 295m - had caused a delay.


It is time for a fresh start for the rail industry

Ian McAllister
Network Rail
The Railtrack Group confirmed in a statement that certain issues were still outstanding, some of which could have prevented cash being returned to shareholders within an acceptable timescale.

"This has caused the board to delay signing the contracts for the sale of Railtrack Plc and the group's interests in the Channel Tunnel Rail Link," the statement said.

"All parties are confident that these issues can be satisfactorily concluded shortly."

A spokeswoman for the Department of Transport spokeswoman added: "This is a complex set of commercial transactions and the government and all parties believe they will be resolved shortly."

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.

Priority for passengers

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.


This is an opportunity to endorse a better way of working

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

"It is time for a fresh start for the rail industry," said the new company's chairman Ian McAllister.

"This is an opportunity to endorse a better way of working, bringing the industry together for the benefit of all rail users."

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

Sources say shares in the remnants of Railtrack will be re-listed at a price of about 250p.

That's 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.

Transport plan attacked

As the Railtrack negotiations continued the government's 10-year transport plan came under renewed attack - this time from business leaders.


The delays are inexcusable

CBI's Digby Jones
The Confederation of British Industry said in a report the plan needed an extra 15bn, and that many top priority schemes had still not started.

"Frankly the delays are inexcusable and something the travelling public does not deserve," said CBI director general Digby Jones.

The criticism follows an attack on the plan by the Commons Transport Committee last month.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Simon Montague
"Confusion amongst commuters is mirrored by confusion over Railtrack's future"
Railtrack Shareholder Action Group David Green
"Now shareholders will be free to do as they wish with their shares"

Key stories

Background

Safety crisis
See also:

24 Jun 02 | Business
03 Apr 02 | Business
02 Apr 02 | Business
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