Tube gloom as BBB knocks PPP

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Metronet and Tubelines, the two consortia taking over the running of London Underground, are expected to fail to achieve an A rating from credit agencies for their financing deals, so cutting their potential profits.

The two groups finalised the commercial agreements for the public-private partnership (PPP) on Wednesday and are now hoping to put more than £4bn of financing in place by the end of June.

It is understood that the Tubelines team of Bechtel, Jarvis and Amey are well advanced with their banking arrangements, but the Metronet group, which includes Balfour Beatty, WS Atkins and Thames Water, plans a £1.5bn bond issue, which will take more time.

Both teams need a credit rating from Moody's and Standard & Poor's. Transport for London, which owns the Tube, is rated AA. But the political risk of interference from Ken Livingstone, the London Mayor, means the consortia are expected to obtain only a BBB+ rating.

Mr Livingstone is expected to go to court for a judicial review of the contracts, a move which could push the completion of the deal back to the autumn. Other hurdles include obtaining clearance from the European Commission and the Health & Safety Executive.

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