Newspaper article The Evening Standard (London, England)

Anti-Shareholder Line Will Harm Tube Prospects

Newspaper article The Evening Standard (London, England)

Anti-Shareholder Line Will Harm Tube Prospects

Article excerpt


EVER since Railtrack became a public company it has operated with an implicit guarantee that Government would provide it with funds. The way these were channelled into the business might vary, but whether it was direct or fed through the office of the rail regulator, it was always clear that the company could not fulfil its brief unless it had Government support.

When John Robinson became chairman earlier this year, one of his first acts was to retain investment bank CSFB to advise him on the group's financial structure, which he thought was not suitable for the job the company was still required to do. Armed with CSFB's proposals, he approached the Government in late July with his ideas of how to put the company on a more sound footing.

The idea was to rehabilitate the company in the eyes of the financial community and the travelling public and at the same time get rid of the layers of bureaucracy and regulation that have second-guessed management and tied the company in knots. Indeed, a key proposal was to remove the regulator from his bizarre role as controller of the purse strings and to redefine what the Strategic Rail Authority was for.

Then, with the undergrowth cleared, Railtrack was asking for a four-year period of agreed funding and at the end of it, provided safety was OK, the projects had been delivered and the money used sensibly, any surplus arising would accrue to shareholders. Conversely, any shortfall would be at their expense.

Talks have continued on a regular basis for two months and Railtrack thought it was heading for a deal until after market hours on Friday. That was when, with no prior warning, Transport Secretary-Stephen Byers called Robinson-in and told him that [pound]750 million-of money Railtrack had expected from Government that day would not be forthcoming and, more fundamentally, that Government would not support the company financially in the future. …

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