Network Rail launches proposal for early exit from administration for Railtrack plc
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Network Rail launches proposal for early exit from administration for Railtrack plc
type Press release
note (Network Rail Limited)
Engineering excellence for Britain's railway
• Network Rail Limited, previously known as 'CLG', a 'not for dividend' company, today launched a proposal to acquire Railtrack Plc.
• The detailed proposal would, if accepted, mark a fresh start for Britain's rail network, releasing Railtrack Plc from administration as early as theend of July 2002.
• Network Rail's proposal, which is supported by a robust business plan, is being delivered today to Railtrack Group Plc and copied to the Joint Special Railway Administrators, to launch a process for negotiations with a view to securing an agreed acquisition of Railtrack Plc and certain other assets.
• Network Rail, a company limited by guarantee, has been created specifically to acquire Railtrack Plc and provide safe, economic and efficient rail infrastructure.
• Network Rail is a company without shareholders but which will be run along commercial lines.
Any operating surplus will be re-invested in the rail network.
• Network Rail's core focus will be the maintenance and renewal of Britain's railway.
It aims to foster a new spirit of cooperation, working in partnership with industry stakeholders to deliver a rail service fit for the 21st century.
• The innovative structure of Network Rail is designed to ensure that investment will be funded at a very low cost of capital, management incentives will be linked to industry-wide performance targets and the suspicion of profit before safety is removed.
• A bridge financing of up to £9 billion, supported by the SRA, will be put in place to enable Railtrack Plc to be refinanced and released from administration as soon as possible.
• Network Rail's proposal to acquire Railtrack Plc includes a fixed 'early exit' payment to Railtrack Group Plc of £500 million, which fully recognises the economic benefit of an early end to administration.
• Network Rail will make separate proposals to repay existing bondholders and intends to fully satisfy all other creditors, as and when due.
Network Rail intends to refinance the bridge financing through capital markets issues later this year.
Ian McAllister, Chairman of Network Rail, says; 'It is time for a fresh start for the rail industry. Network Rail's proposal marks a watershed for Britain's railway. It is an opportunity to endorse a better way of working, bringing the industry together for the benefit of all rail users.
'We will end the confrontation that has all too often characterised this fragmented industry and establish new management structures and incentives to deliver system-wide performance and safety improvements. We will build on the pride and passion in Railtrack's people, elevating engineering excellence to where it belongs, at the heart of the rail network.
We are committed to continually improving safety standards on Britain's railways.
'Network Rail's proposal is robust and comprehensive. It has been developed following an immense amount of detailed preparation work. We have undertaken extensive consultation with key industry partners, and our proposals reflect their valuable input.
'I believe that this approach is the best way to ensure that Railtrack Plc does not remain in administration for a great many months to come. The 'early exit' payment is the only realistic option for Railtrack Group Plc to realise value in the short term.
'Network Rail was created to solve the accumulated problems of Britain's rail infrastructure. This cannot happen overnight, but Network Rail will deliver investment funded at a very low cost of capital and avoid any suggestion of putting profit before safety. Network Rail has the structure and the vision to deliver a rail network which meets the expectations of the travelling public.'
Network Rail is a 'not for dividend' company, dedicated to the interests of rail users and run for the benefit of the railway, not to maximise profit for shareholders. It will concentrate on its core priorities of operating, maintaining and renewing Britain's rail network. Network Rail will focus on its critical role of delivering engineering excellence.
The Board of Network Rail, which will comprise a majority of non-executives, will adopt best practice private sector corporate governance policies. Network Rail has no shareholders, rather it is accountable to its members.
Members fall into three categories; the SRA; industry members, who will be representatives of rail licence holders; and public interest members, who will form the majority, chosen from a wide range of stakeholder groups.
Network Rail's Business Plan
Network Rail has developed a robust business plan built on a clear vision - engineering excellence for Britain's railway. Network Rail has not yet had the benefit of discussions with the management of Railtrack Plc and will not make final decisions about its business plan until it has had the opportunity to do so. We look forward to starting this dialogue. Network Rail's commitment to operational and engineering excellence will guide all its proposals.
Network Rail understands that Railtrack's workforce is currently enduring a prolonged period of uncertainty. Implementation of these proposals will end this uncertainty in the shortest possible time. Network Rail attaches considerable importance to retaining the skills and expertise of the management and employees of Railtrack. Network Rail is committed to building up on the high levels of safety and excellence at every level of the organisation and will build Railtrack's operational and engineering skills base.
The existing terms and conditions, including pension rights of Railtrack employees will be safeguarded. Network Rail attaches considerable importance to retaining the commitment, experience, skills and expertise of the management and employees of Railtrack and we believe that we can enhance the prospects of existing Railtrack employees by making the company an attractive organisation in which to work.
A key attraction of Network Rail's business plan is the emphasis on whole-life, efficient, cost-effective, asset management strategies not short-term financial targets. Appropriate management incentives will be introduced to foster cooperative working arrangements, particularly with passenger and freight operating companies.
Train punctuality will be improved by an increase in maintenance expenditure designed to ensure a higher level of availability. Network Rail will begin the process of implementing the enhancements identified in the SRA strategic plan. The early exit that Network Rail intends to deliver will re-invigorate the process of delivering a renewed rail network, fit for the needs of the travelling public.
Details of Network Rail's proposal
Network Rail has delivered to Railtrack Group Plc and the Joint Special Railway Administrators, a detailed proposal designed to ensure a rapid exit from administration for Railtrack Plc. In order for Network Rail to confirm its financing plans, Railtrack Group Plc has been asked to provide access to certain specific information.
The comprehensive proposal to acquire Railtrack Plc includes a fixed 'early exit' payment to Railtrack Group Plc of £500 million, which fully recognises the economic benefit of an early end to administration. This payment will only be made on the basis of an early end to administration Network Rail believes strongly that its proposal represents the best option for Railtrack Group Plc to realise value from Railtrack Plc in the short term.
The proposal to acquire Railtrack Plc requires the support of Railtrack Group Plc shareholders at an Extraordinary General Meeting. Network Rail believes that the benefits of its proposals will result in shareholder support. The proposal is also subject to the satisfaction of the conditions to its financing arrangements, regulatory and other approvals. Network Rail is convinced that its proposal could successfully release Railtrack Plc from administration as early as the end of July 2002.
Discussions have commenced with the ORR and HSE concerning, respectively, economic regulation and a detailed safety case. Furthermore, Network Rail believes its plans fully meet the guidelines established by the Secretary of State in October 2001.
Network Rail represents an innovative solution to the investment demands of Britain's rail infrastructure. Network Rail will derive its revenues from track access charges and property income, as well as grants provided by the SRA. The proposal envisages a low risk business model with secure revenue streams.
Initially, Network Rail intends to borrow up to £9 billion of bridge finance, with the SRA providing subordinated standby loans to Network Rail. This will enable Network Rail to raise sufficient funding to complete the acquisition of Railtrack Plc, to refinance its existing debt, which is estimated to be £6.5 billion at the end of March and to fund its operations. Later this year, Network Rail intends to refinance its initial borrowings through capital markets.
Network Rail and SRA have discussed arrangements for delivering the enhancement programme as outlined in the SRA Strategic Plan. Major enhancements of the rail network will be undertaken principally by Special Purpose Vehicles which will involve the design, build, finance and transfer of significant projects to Network Rail at pre-agreed prices.
For further information, please contact:
Jon Simmons, Network Rail/Financial Dynamics
T: 020 7269 7215 Monday 25 March only
T: 020 7831 3113 Tuesday 26 March onwards
Robin Budenberg, UBS-Warburg T: 020 7568 2827
Simon Monk, UBS-Warburg T: 020 7568 8487
This information is provided by RNS
The company news service from the London Stock Exchange
Railhub Archive ::: 2002-03-25 NET-001