Barclays to be £4bn Railtrack creditor

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Barclays Capital is this week expected to sign a £4.4bn refinancing deal with Railtrack's administrator, in a move that will make the wholesale arm of the high street bank one of the biggest creditors to the failed track operator.

Alan Bloom, the chief administrator, will reveal that a huge government loan made to Railtrack in October has been transferred to the private sector. Mr Bloom will stop short of naming the bank, but insiders report that Barclays is set to take on the debt.

Because of the size of the loan, Barclays will look to pass some of the risk to other banks through syndication. Although it has taken on loans to what is one of Britain's highest-profile corporate failures, the risk to the bank will be low.

Transport Secretary Stephen Byers has agreed to guarantee the loans, meaning that if Railtrack – or whatever succeeds it – defaults on a repayment, then the Government will step in and meet the demand.

The Government agreed to lend Railtrack the money shortly after Mr Byers placed the company into administration in October. Of the £4.4bn, Railtrack has already drawn down £2.1bn to pay existing trade and finance creditors and provide working capital. Railtrack is expected to dip into the rest of the facility in the coming months.

There are fears, however, that Railtrack may need another cash injection before it comes out of administration.

Originally, Mr Byers said the company would be run by Ernst & Young for three to six months. Last week Mr Bloom warned that Railtrack might not come out of administration before next year.

The latest delay is due to problems surrounding the opening of the "data room" that will offer potential Railtrack bidders detailed financial information on the company.

However, if Railtrack applies to the rail regulator for an interim review of its finances, it may be in administration well into 2003.

While the banks are willing to take on Railtrack's debt – principally because it will be guaranteed by the Government – few companies are interested in taking over the operation of Railtrack.

As revealed by The Independent on Sunday, US finance house Babcock & Brown is on the verge of pulling out of bidding. Meanwhile, German bank WestLB is planning to join the government-backed bid, set up as a company limited by guarantee. There are no other known private bidders.