Railtrack float looks set for top price

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The Independent Online
Railtrack looks likely to be sold for a price at the top of the Government's pounds 1.75bn to pounds 1.95bn range, after heavy interest by City institutions.

Investors do not appear to have been deterred by the renewed bad publicity about the company in recent days, including advice from Lloyds Bank and NatWest to their private clients that they do not regard Railtrack as a suitable long-term investment.

Institutions are believed to have made indicative offers that comfortably oversubscribe their share of the privatisation, and substantial numbers of applications have already been received from private investors, well ahead of the close next Wednesday at noon.

The indications are that the government will have no difficulty selling the shares at the top of the 350p to 390p range announced 10 days ago for international investing institutions. Private investors pay 10p a share less.

The prices on offer from professional investors will not be confirmed until next Friday afternoon when the international tender offer closes.

The present stage is a bookbuilding exercise during which institutions tell SBC Warburg, the global co-ordinator, how much they expect to buy and at what price.

The institutions are not committed to their offers until the close and are theoretically entitled to withdraw altogether. But the level of interest at this stage is usually regarded as useful pointer to the outcome. The offers have come from a wide spread of institutions in the UK and overseas.

The level of private applications also looks on track for an oversubscription of the minimum of 30 per cent of the shares earmarked for retail buyers. It now looks highly likely that the retail proportion will be raised to 40 per cent or more.

However, it emerged that Lloyds Bank had sent a letter to in-house investment managers warning that shares offered in the flotation may not be appropriate for longer-term or more cautious private investors. "We have said that Railtrack may not be the most appropriate investment for these type of investors," a spokeswoman confirmed. NatWest has already issued a similar warning to its private clients about the flotation.

Brian Wilson, Labour's spokesman on rail, said the flotation's credibility had been dented by Lloyds' warning.

Meanwhile, Railtrack's bankers, BZW, a subsidiary of Barclays, have had difficulty syndicating a pounds 2.35bn loan from a core syndicate to a wider group of banks.

The loan is underwritten and Railtrack will receive the money whatever happens. But BZW's attempt to spread the risk around more widely than the 20 banks so far involved has proved problematic.

Railtrack sources dismissed claims that the banks were going cold on the company because of the political risk of what a Labour government would do.

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