Rail administration to drag on beyond September

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The Independent Online

Railtrack's administrator yesterday cast fresh doubt on the Government's timetable for transferring the failed network operator to new owners by September.

Alan Bloom, of Ernst & Young, said the timescale was "challenging and tight" adding that a lot depended upon how much interest Railtrack attracted when the marketing of the business began in earnest in March.

Asked about Railtrack's own estimate that the network could be in administration for two years, Mr Bloom said: "Everyone has a view, it will take as long as it takes. The September timetable is a challenge but it is possible. I would say it is tight."

Mr Bloom also said he was opposed to the two most likely bidders for Railtrack – the company limited by guarantee favoured by Stephen Byers and the private consortium led by WestLB – making a joint offer as has been rumoured. "Our aim is to deliver the best results for creditors and shareholders so the more bidders we have the better. We are not going to encourage bidders to collaborate with one another," he said.

The administrator hopes to open a data room at the offices of its legal advisors, Slaughter and May, in March giving bidders access to key financial information on Railtrack including the five-year plan being drawn up by its new chief executive John Armitt.

Mr Armitt has already said that the plan will require more than the £15bn allocated under the current settlement from the Rail Regulator, Tom Winsor, and more than the £18.6bn Railtrack was seeking before it was placed in administration.

Mr Bloom said it was not possible to put a figure on the money needed but he conceded that it was likely to be more than £19bn.

WestLB has estimated that up to £6bn extra may be needed on top of what the regulator has allowed. But part of the difficulty for bidders is that they will have to bid "blind" for Railtrack because the administrators will not have compiled a full asset register of the network by the time the data room opens.

"We have a good idea of what assets Railtrack owns and where they are but we don't have a full schedule of what condition they are in," Mr Bloom said. "People are just going to have to bid with that uncertainty."

The sale of Railtrack will be handled by the administrator's financial advisers Deutsche Bank, which is expected to publish a detailed timetable for the bidding process next month.

The administrators will have borrowed about £5bn from the Government to keep Railtrack in operation by this coming September, money which the successful bidder will have to repay or refinance.

Mr Bloom said it was not possible to say whether the amount borrowed was more than Railtrack would have needed had it not been forced into administration.

He dismissed claims that the administration was costing £1m a day, saying the true figure was nearer a tenth of that. "I would put it at £100,000 a day, seven days a week," he said. On that basis, it will cost £37m for the first year of administration.

Ernst & Young has a core team of 25 to 30 staff working on the administration but in any given week the number can rise to as many as 40 to 45. In addition to Slaughter and May and Deutsche Bank, Mr Bloom is also receiving technical advice from AEA Technology and property advice from Grimley's.

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