[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Monday, 16 October 2006, 05:13 GMT 06:13 UK
GNER owner in debt squeeze move
GNER train
GNER's profit margins are set to fall below franchise estimates
The US parent of British rail business GNER is on the verge of filing for Chapter 11 bankruptcy protection.

Sea Containers - the passenger and freight transport firm - is likely to take the step on Monday after deciding it cannot repay its $630m (339m) debt.

The move will give it legal protection from its creditors and breathing space to restructure its finances.

The firm said any such move would have no impact on GNER, which runs intercity trains along the East Coast main line.

But rail unions have expressed fears that it could lead to job losses.

'Business as usual'

GNER has struggled since it was given a 10-year extension to its franchise last year to operate trains between London and Edinburgh.

Passenger revenues for the first 14 months of its franchise were 32m lower than anticipated, hit by the impact of the 7 July attacks, rising electricity prices and growing competition.

Sea Containers has made it clear that it will have no impact on the operation of the GNER franchise
Department of Transport

Earlier this year GNER lost a legal battle to prevent rivals Grand Central and Hull Trains Company from operating services linking East Coast towns with London.

GNER has broached the revenue shortfall with the government but Sea Containers stressed that its own financial difficulties would have no impact on these discussions or on the franchise itself.

"It is completely separate and will absolutely not have any impact on GNER," a company spokeswoman said.

"Trains and operations will continue to function as normal."

Debt dues

The Sunday Times reported that the Department of Transport had hired law firm Clifford Chance to advise on the potential legal issues arising out of such a move by Sea Containers.

The Department of Transport said it could not comment on this but added that the issue was a "commercial matter" for Sea Containers.

"Sea Containers has made it clear that it will have no impact on the operation of the GNER franchise," a spokesman said.

Sea Containers has cut its debts in half over the past year but following a meeting with creditors in New York, it is almost certain to opt for bankruptcy protection as a means of reorganising its borrowing.

Chapter 11 is a US legal device that allows a bankrupt business to carry on operating under the existing management and prevents creditors from forcing it into liquidation.

GNER owner 'cannot pay huge debt'
13 Oct 06 |  Business
Rail firm 'may have to cut jobs'
10 Oct 06 |  England
GNER in court over rival operator
11 Jul 06 |  Business
GNER to challenge rival in court
22 May 06 |  Business
Rail newcomer wins service battle
23 Mar 06 |  Business
Passengers support extra services
10 Feb 06 |  Bradford

The BBC is not responsible for the content of external internet sites

Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit


Americas Africa Europe Middle East South Asia Asia Pacific