London & Continental Railways (LCR) will buy Railtrack‘s interests in the UK’s Channel Tunnel Rail Link (CTRL) for US$576.11M, it was announced on 27 June.
“The transaction re-establishes the construction of the CTRL infrastructure under unified management and ownership,” LCR’s chief executive, Bob Holden said. “This should allow full transfer of expertise and experience between the two sections and avoid the duplication of work and roles.”
This formed part of a deal in which Railtrack sold its core railway business to Network Rail, a not-for-profit company set up by the government, for US$768.15M. Network Rail will also pay US$122.9M to LCR for the right to operate the completed CTRL link and manage St. Pancras station. Railtrack also abandoned its plan to sue the government over its decision to halt funding in October 2001.
Legal wrangles concerning performance guarantees contained in agreements over the CTRL delayed an earlier deal from being struck. With performance-related guarantees in place, it was unlikely that shareholders would receive the US$3.84 a share that Railtrack eventually wants to return. The first payout is expected to be US$2.77 a share in January 2003.
Railtrack shares resumed trading at US$3.30 on 27 June, following their suspension at US$4.30 last October when the government forced the ailing company into administration.
Network Rail negotiated a US$13.83bn short-term bridge finance facility to acquire Railtrack, refinance the existing debt and fund its operations. Railtrack bond issues will also be repaid early.
Network Rail will plough profits back into the business rather than hand them over to shareholders in the form of dividends, meaning more money will be made available for track and tunnel maintenance.
Subject to shareholder approval, all sales should be completed by September.
