Prism founders get shares worth pounds 5.4m

The seven founder investors of Prism Rail, the company set up to tender for passenger train franchises, were awarded more free shares worth pounds 5.4m yesterday after announcing plans to finance their fourth successful bid.

Details of the latest share bonanza emerged as Prism announced a pounds 12m rights issue to help fund the contract to operate West Anglia Great Northern railway, the heavily subsidised line which runs from London to Stansted airport, Cambridge and Peterborough.

The founders already own just over a third of Prism's shares, worth more than pounds 30m at last night's closing price of 445p, compared with their placing price in May of 100p.

The launch yesterday of the five-for-28 rights issue at a deeply discounted 330p a share set off a complex ratchet mechanism. Under the terms of a deal agreed when Prism gained a listing on the Alternative Investment Market, a total of 16.5 million deferred shares were issued at par to the founders in return for them agreeing to fund the cost of Prism tendering for rail franchises up to pounds 2.7m.

In October the investors, six of whom run private bus companies, were awarded shares worth pounds 7.4m after Prism took over two rail franchises, South Wales and West Railway and Cardiff Railway.

Prism defended the latest award of shares, saying the founders had taken the time and financial risk of bidding for 18 of the 25 available rail franchises without a guarantee they would win any. "We didn't borrow the money, and we are taking no salary from Prism," said Godfrey Burley, Prism's chairman.

The subscription agreement ensures that the founder investors receive deferred shares equivalent to 25 per cent of any new ordinary shares issued. The deferred shares are convertible into ordinary shares on a one-for- one basis every time Prism is awarded a new franchise and fresh equity is raised to fund its operations.

In addition to the new shares awarded yesterday, the seven founders also share in a pounds 620,000 payment for waiving their entitlement to take up shares in the rights issue, which is fully underwritten by stockbrokers William de Broe. As a result, the directors' stake in Prism will fall from 33.6 per cent to just under 32 per cent.

The founders of Prism are Mr Burley and Peter Shipp, who run Yorkshire Motor Services Group; finance director Giles Fearnley and Stuart Wilde, who run Blazefield Buses; Robert Howells, chairman of the bus company Lynton; and Len Wright, of the bus company Q Drive. The seventh founder is Kenneth Irvine, who used to write papers on privatising British Rail for the Adam Smith Institute, a free market think-tank.

Prism has bid for 18 of the 25 rail franchises being sold off and is shortlisted for the Scotrail and North West Regional Railways contracts.

Comment, page 15

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