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Railhub Archive
2001-10-15 RTK-001
Railtrack Group plc


Railtrack Group sets out sequence of events leading to administration of Railtrack plc

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Railtrack Group plc

Railtrack Group sets out sequence of events leading to administration of Railtrack plc

15 October 2001
source Railtrack Group plc
type Press release/letter

The Board of Railtrack Group has reviewed recent press reports about the
financial position of its Railtrack PLC subsidiary, now in Administration, and
is concerned that some important aspects have been misunderstood. In
particular it wishes to assert the following five points:

1. Railtrack PLC was not insolvent as of 4.45pm on the afternoon of
Friday 5 October. The attached letter from Railtrack to Government sets out
very clearly the events which triggered the Administration of Railtrack PLC.
This letter was accepted by Government on Sunday 7 October for the purposes of
its disclosure to a High Court judge to support its own application for
Railway Administration. Ultimately, because Government declined to confirm
Railtrack Group's ownership of the £370m cash balance and CTRL, the letter was
not disclosed as permission to do so was declined by Railtrack's board.

2. The Company was not facing 'a funding meltdown' as Mr Byers is
reported to have said. The financial difficulties faced by the Company
broadly remained as they were at the time of Railtrack's full-year results
presentation in May. Some months had been spent in conjunction with Mr Byers'
officials constructing a plan for Railtrack's future financial structure.
The clear impression given to Railtrack was that Government still viewed the
proposal positively after a meeting together on 3 October.

3. At no time did Railtrack's Directors propose to Government that
Railtrack PLC should be put into Railway Administration, nor was this
possibility ever actively considered at any meeting between Railtrack and the
Government. Throughout the discussions cited above, references were regularly
made - both spoken and written - to the Railway Administration,
renationalisation and not for profit trust options, by way of identifying all
possible outcomes facing Railtrack PLC, but only in order to give both sides
the opportunity to rule these options out of consideration for clear and
compelling reasons. The clear impression given at the outset by the DTLR
officials was that these were not realistic options; this was not
contradicted in any subsequent discussions once Ministerial advice had been
taken by officials.

4. Railtrack had no choice but to acknowledge on Sunday 7 October that
Railtrack PLC had effectively been rendered insolvent by virtue of the
Government's actions in two key respects:

o The Government had made clear that no further financial assistance
whatever would be available from the Government - a reversal of public
policy already presaged by the non payment of £162m that had been due on
October 1.

o The Government had effectively removed the power of the Rail Regulator
to fulfil his legislative role by undertaking a review of Railtrack's
immediate financial requirements, hitherto understood by both equity and
debt investors in the Company to be the statutory redress for any critical
funding problems.

5. Railtrack had repeatedly warned Government officials, throughout a
series of detailed discussions between July 25 and October 5, that it would
need to be advised immediately if, at any point, Government decided to
withdraw support (including termination of project Rainbow).

Any such advice would have required Railtrack to review the need for a public
announcement and would have led immediately to the preparation of other
financial plans by Railtrack's management (including reductions in all non
safety critical investment and a possible approach to the Regulator).
However, no such advice, either explicit or tacit, was received by Railtrack
at any time up until 5pm October 5.

The Board welcomes the prospect of a public statement this afternoon by Mr
Byers and would hope to hear him confirming his acceptance of these points and
clarification of the position of the Channel Tunnel Rail Link and certain
funding guarantees currently given by Railtrack PLC.

- ends - [[letter follows as appendix]]

Contacts: Sue Clark 020 7557 8292/3 (Railtrack)
Donal McCabe 020 7557 8292/3 (Railtrack)
Duncan Campbell-Smith 07774 250811 (Maitland Consultancy)

All recent press releases can be found on the Railtrack web site

Appendix - 1

The Rt Hon Stephen Byers MP
Secretary of State for Transport, Local Government and the Regions
Eland House
Bressenden Place

7th October 2001

Dear Secretary of State

I am writing to confirm that the current view of the Chairman and the
Executive Directors of the Company is that the financability of Railtrack has
been materially and adversely affected by:

a) the notification by Government on Friday 5th October 2001 at 4.45pm
that it is not prepared to advance any additional funds over and above those
countenanced within the Regulatory settlement;

b) the Government's action in holding back monies due under the
previously agreed Renewco arrangements as well as the Government's recent
statement to Railtrack that it is unable/unwilling to proceed with the Renewco
financing arrangements;

c) the public impact of the press and TV coverage of the Government's
stated intention to put Railtrack into Administration and the effect this will
have on Railtrack's ability to raise finance in the short and medium term.

In these circumstances, in the opinion of the Chairman and the Executive
Directors of Railtrack, it will be extremely difficult to draw on the Bridging
facilities available to it or to access the public bond markets in the short
or medium term. The impact of this is to pose an immediate difficulty in
drawing down on funds from the beginning of next week and, most importantly,
the prospects of refinancing those drawings and our other liabilities, such as
to our bondholders, when they mature.

The markets had previously relied upon Government support for and financial
backing of the Company, which is now publicly not forthcoming. Without that
support, there is no realistic prospect of raising further finance and
refinancing our existing commitments.

Furthermore, we have reached the view that delay in the appointment of an
administrator, in accordance with the Government's statement that this is what
it intends to do this weekend, would at this stage result in severe
operational problems for the Company, given the uncertainty caused by these
matters now in the public domain since Friday. For example, the 6,000
signallers who operate the country's rail network will need to believe that
they will continue to be paid now and for the medium term future, which
assurance the Company cannot give without Government support.

I further confirm that the Company waives the requirement contained in rule
2.6 of the Railway Administration Order Rules 2001 for service on it of the
petition for a railway administration order and supporting evidence. As far
as we are aware (a) there is no security granted by the Company which has not
been submitted for registration at Companies House; and (b) there is no
petition or resolution outstanding for the Company's winding up.

In reaching this conclusion, the board has been mindful of the Railways
administrator's statutory duty to manage the Company in a manner which
protects both the interests of creditors and, as importantly, members of the

Yours sincerely


Railhub Archive ::: 2001-10-15 RTK-001


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