The threat of insolvency hanging over Railtrack Group, the parent company of the collapsed network operator, was partially lifted last night after Stephen Byers agreed to respond positively to its demand to retain ownership of the Channel Tunnel Rail Link.
The Secretary of State for Transport's offer, which will be set out in writing on Monday, could be worth an additional £400m or 75p a share to Railtrack shareholders. This is in addition to the 70p they stand to collect after Railtrack was allowed "in principle" to keep £370m frozen in an HSBC bank account.
After a 90-minute meeting yesterday at Department of Transport headquarters, Railtrack's chairman John Robinson emerged to say that Mr Byers "had promised to come back to us in writing on Monday in as helpful a way as possible".
Steve Marshall, Railtrack's chief executive, who also attended the meeting, said the atmosphere was "workmanlike" adding: "The Secretary of State said he hoped he would be able to respond positively. He did explain he wanted to help us release the value in the Group."
If Railtrack lost the CTRL, then it would be in a position where its liabilities exceed its assets, meaning that the £370m of cash would not be accessible and its banks could start calling in their loans.
The minister's olive branch was not enough, however, to prevent angry shareholders from formally launching an action group to recover their money. Meanwhile doubts continued to grow over whether the not-for profit trust which the Government proposes to take over Railtrack's assets would get financial backing from the City.
Mr Byers refused to speak to the press again yesterday. But he did give three television interviews, including one to BBC1's lunchtime news in which he blamed Railtrack for not keeping shareholders informed. "The issue about telling the markets is a direct responsibility of the directors of Railtrack, not for the Government," he said.
That remark caused incredulity among Railtrack directors, who pointed out that up until 4.45pm, on Friday, 5 October, the Government had repeatedly assured them that it continued to support Railtrack as a public company.
There was a sceptical reaction in the City, meanwhile, to the confirmation that WestLB, the state-owned German investment bank, might lead a consortium bid for Railtrack. A WestLB spokesman confirmed it had made a preliminary approach to the Government earlier this week but stressed: "It is not right to describe it as a bid, what we did was run through several financing options."
Banking sources pointed out that any new private owners of Railtrack would face the same predicament as current management. "Sure there are some corporate financiers in the City who can come up with a proposal that could earn them a fee. But the people who will really decide whether Railtrack is worth buying are the credit committees of the banks and the big fund managers and they will take some convincing," one source said.
Standard & Poor's, which cut its credit rating on Railtrack to one notch above default on Tuesday, said it stood by its move. Mike Wilkins, head of infrastructure at S&P, also questioned whether a not-for-profit trust would be financeable: "It is not impossible but it will certainly be a big challenge." Any backers would also demand much higher returnsfollowing the Government's treatment of Railtrack.
Meanwhile, investors owning 25 to 30 per cent of Railtrack said they would be seeking 360p a share in compensation. Simon Haslam of Fidelity Investments, one of the leading members of the Railtrack Shareholders Action Group, said: "The Government has acted improperly by effectively deciding to renationalise the group." He said among the possible courses of legal action was a judicial review.Reuse content