Ministers are close to reaching agreement with the Railtrack board over a debt level of about pounds 600m. Since Railtrack has existing debts of pounds 1.5bn, this will mean a write-off of about pounds 900m for the Government. Provisional debts of pounds 600m have been pencilled in for the flotation, a level which Railtrack appears relatively happy with.
Negotiations over the debt level have been prolonged and sometimes heated, with Railtrack arguing that it would be incapable of investing adequately if it is saddled with too much. The talks sometimes involved a degree of brinkmanship by the Railtrack chairman, Robert Horton, though he stopped short of threatened resignation.
The outcome is a compromise - Railtrack would have liked less - but most observers thought it a good result for the company ahead of privatisation.
The Treasury appears to have eased its hard line - it wanted up to pounds 1bn of debt in the balance sheet - after ministers decided to give the go- ahead to the Thameslink 2000 project, an upgrade of the track linking north and south London.The go-ahead for the project was formally announced by the Government yesterday.
Agreement on debt removes one of the last obstacles to Railtrack's flotation, scheduled to take place in May. The company is expected to be valued at about pounds 2bn, and with debt now secure at a manageable level, holds out the prospect of a steadily rising dividend stream.