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Last Updated: Monday, 16 October 2006, 06:52 GMT 07:52 UK
GNER owner makes Chapter 11 move
GNER train
GNER says it will be business as usual in the UK
The US parent of British rail firm GNER has filed for Chapter 11 bankruptcy protection in the US.

Bermuda-based passenger and freight transport firm Sea Containers made the move on Monday, after deciding it could not repay its $630m (339m) debts.

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

There will be no impact on GNER, which will continue running intercity trains along the East Coast main line.

We continue with our business strategy and for our key operating units it will be 'business as usual'
Sea Containers CEO Bob Mackenzie

Sea Containers and two subsidiaries, Sea Containers Services and Sea Containers Caribbean, filed for protection in the US Bankruptcy Court for the district of Delaware.

"The prime reason for seeking protection is to prevent any individual creditor from taking action on its own, which would be against the interests of Sea Containers and the majority of creditors," said Sea Containers chief executive Bob Mackenzie.

"We continue with our business strategy and for our key operating units it will be 'business as usual'."

'Uncertain time'

Mr Mackenzie added that "operating subsidiaries such as GNER, the UK rail operator... will continue their day-to-day operations".

After the announcement, rail users group Passenger Focus told the BBC: "We hope that this uncertain time does not affect the current good performance of GNER on the route."

They said they hoped the Department for Transport(DfT) would work with GNER to ensure the long-term viability of the East Coast service.

Should GNER not be able to keep operating on the route, the DfT would take over running the services as an "operator of last resort" to ensure passenger trains continue.

Franchise extension

Sea Containers said it had kept the UK Department for Transport "abreast of developments" and that GNER was not in breach of any of its franchise commitments.

It said that GNER's finances had been "ring-fenced" from those of Sea Containers.

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

GNER Class 91 locomotive
GNER services connect London to north-east England and Scotland

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.

In the summer GNER lost a court bid to prevent Grand Central running services from Sunderland to London this winter on the East Coast main line.

Sea Containers, suspended from the New York Stock Exchange earlier this month, has cut its debts in half over the past year.

However on Sunday the ferry and freight company warned it was unlikely to be able to pay a 62m which became due on Monday morning.

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.


VIDEO AND AUDIO NEWS
Sea Containers Ltd on GNER's future



SEE ALSO
GNER owner in debt squeeze move
16 Oct 06 |  Business
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

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