Railtrack
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Railtrack was a group of companies which owned the tracks, signals, tunnels, bridges, level crossings and some stations of the British railway system from its privatisation in 1996 until 2002. Its main operating arm, Railtrack plc, was sold to "not for dividend" organisation Network Rail on October 3, 2002, and was later renamed Network Rail Infrastructure Ltd. The parent company Railtrack Group plc was renamed RT Group and went into liquidation.
Founded under Conservative legislation that privatised the railways, Railtrack took control of the railway infrastructure on 1 April 1994 and was floated on the Stock Exchange in 1996. Railtrack plc was taken into Railway Administration under the terms of that legislation on October 7, 2001, following an application to the High Court by the then Transport Secretary, Stephen Byers. Network Rail was then formed with the principal purpose of acquiring and owning Railtrack PLC. This was welcomed at the time by groups that represent British train passengers. Railway Administration is a special form of Administration set up by the Railways Act 1993, where an Administrator is appointed to run the company and keep the railway operating.
The company had been severely criticised for both its performance in improving the railway infrastructure and for its safety record. The British government put the company into administration after deciding its current level of indebtedness no longer made it financially viable as a commercial organisation without repeated, substantial hand-outs from the taxpayer. The company claimed that it had a "plan B" to put into operation if grants weren't forthcoming. The legislation that created it prevented the actual infrastructure being sold to pay debtors.
Demise
The train crash at Hatfield, and the subsequent major repairs undertaken across the whole British rail network, is estimated to have cost in the order of £580 million. This, and other debt issues, caused Railtrack to approach the government for funding, which it controversially used partly to pay a dividend to its shareholders. This was the last straw for the increasingly impatient Labour Government, who placed the company into administration. Critics accused Labour of deliberately bankrupting Railtrack in order to force what many saw as partial renationalisation.
Shareholders initially received no compensation nor were they promised any. The Government considered that the act of administration was valid as it performed under terms set out in the privatisation legislation.
Railtrack's parent company, Railtrack Group, continued to exist under the name RT Group, and was placed into members’ voluntary liquidation on October 18, 2002. The Railtrack business (and its £7 billion debt) had been sold to Network Rail for £500 million, and the various diversified businesses it created to seek to protect itself from the loss-making business of running a railway were disposed of to various buyers. £370 million held by Railtrack Group were frozen at the time the company went into administration and were earmarked to pay Railtrack shareholders an estimated 70p per share in compensation. The Group's interest in the partially built Channel Tunnel Rail Link was also sold to raise funds.
Railtrack shareholders formed two groups to press for increased compensation. A lawyer speaking for one of those groups remarked on GMTV that his strategy was to sue the government for incorrect and misleading information given at the time Railtrack was created, when John Major was Conservative Prime Minister. An increased offer of up to 260p per share was enough to convince the larger shareholder group, the Railtrack Action Group, to abandon legal action. The smaller Railtrack Private Shareholders Action Group continues to press its claim. The trial of this claim against the Secretary of State for Transport will be heard in the Chancery Division of the High Court starting in summer 2005.
The Guardian reported on November 23, 2001, that a further £3.5 billion may be needed to keep the national railway network running, a sum disputed by Railtrack management. Profits announced mid December undermined the Government's case that the Company had ceased to be commercially viable and a long and politically embarrassing legal battle looked likely.
External links
- RT Group homepage: rtgroup.co.uk (http://www.rtgroup.co.uk/)
- Guardian news story (http://www.guardian.co.uk/transport/Story/0,2763,605278,00.html)
- BBC news report on Railtrack compensation, December 2002 (http://news.bbc.co.uk/1/hi/business/2573805.stm)