Railtrack - Railtrack Administration - B

Railtrack - B

Railtrack Administration

On 7 October 2001, Railtrack plc was placed into railway administration under the Railways Act 1993, following an application to the High Court by the then Transport Secretary, Stephen Byers. This was effectively a form of bankruptcy protection that allowed the railway network to continue operating despite the financial problems of the operator. The parent company, Railtrack Group plc, was not put into administration and continued operating its other subsidiaries, which included property and telecommunications interests. If this action had not been taken, rail services throughout Britain may have entirely stopped for a time.

For most of the year in administration, the government's position had been that the new company would have to live within the existing regulatory settlement (£14.8 billion for the five years 2001-2006). However, it soon became obvious that that was impossible, and that the aftermath of the Hatfield crash had revealed that the network required significantly more money for its operation, maintenance and renewal. It was reported on 23 November 2001, that a further £3.5 billion may be needed to keep the national railway network running, a sum disputed by Ernst & Young, the administrators. During February 2002, the European Commission approved the provision of state aid to the ailing Railtrack in order to maintain operations.

To get Railtrack out of administration, the government had to go back to the High Court and present evidence that the company was no longer insolvent. The principal reason given by the government to the court for this assertion was the decision of the rail regulator - announced on 22 September 2002 - to carry out an interim review of the company's finances, with the potential to advance significant additional sums to the company. The High Court accepted that the company was not therefore insolvent, and the railway administration order was discharged on 2 October 2002.

Transfer of Railtrack Assets to Network Rail

Network Rail was formed with the principal purpose of acquiring and owning Railtrack plc. Originally the Government allowed private companies to bid for Railtrack plc. However, with limited availability of financial data on Railtrack, the political implications of owning the company and the very obvious preference of the government that the national railway network should go to Network Rail, no bidders apart from Network Rail were forthcoming, and Network Rail bought Railtrack plc on 3 October 2002. Railtrack plc was subsequently renamed to Network Rail Infrastructure Limited.

Network Rail's acquisition of Railtrack plc was welcomed at the time by groups that represented British train passengers. The attitude of Railtrack's customers - the passenger- and freight-train operators - was much more cautious, especially as they were wary of a corporate structure under which shareholders' equity was not at risk if the company's new management mis-managed its affairs.

Railtrack Overview

Railtrack Type: Public

Railtrack Industry: Rail transport

Railtrack Predecessor: British Rail

Railtrack Founded: 1 April 1994

Railtrack Defunct: 18 October 2002

Railtrack Fate: Renationalised

Railtrack Successor: Network Rail

Railtrack Headquarters: London, England

Railtrack Key People: John Robinson (Chairman)

Gerald Corbett (CEO)

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