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Railtrack was a group of companies that owned the tracks, signals, tunnels, bridges, level crossings and some stations of the British railway system from its formation in April 1994 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, which has now been renamed as the RT Group, is currently in members' voluntary liquidation and will remain in existence until the final liquidation payment is made to shareholders in 2008.

Founding

Founded under Conservative legislation that privatised the railways, Railtrack took control of the railway infrastructure on April 1, 1994 and was floated on the Stock Exchange in 1996. Railtrack plc was placed 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. The parent company, Railtrack Group plc, was not placed into administration and continued operating its other subsidaries which included property and telecommunications interests. Network Rail was formed with the principal purpose of acquiring and owning Railtrack plc. Orginally the Government allowed private companies to bid for Railtrack plc, however, with limited availability of financial data on Railtrack and the political implications of owning the company, no bidders apart from Network Rail were forthcoming. Network Rail's acquisition of Railtrack plc was welcomed at the time by groups that represent British train passengers.

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" (which included cutting the dividend paid to shareholders) 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 fatal accidents at Southall and Ladbroke Grove in 1999 had already called into question the effect that the fragmentation of the railway network had on both safety and maintenance procedures. However, it was the Hatfield crash in October 2000 which proved to be the defining moment in Railtrack's eventual collapse. The subsequent major repairs undertaken across the whole British rail network are estimated to have cost in the order of £580 million. According to Christian Wolmar (On the Wrong Track), the Railtrack board went into panic mode in the wake of Hatfield. Because much of the engineering skill of British Rail had been split off into the maintenance and renewal companies, Railtrack had no idea how many Hatfields were waiting to happen. Nor did they have any way of assessing the consequence of the speed restrictions they ordered -restrictions that brought the railway network almost to a standstill. Meanwhile, the costs of modernising the West Coast Main Line were spiralling out of control, and coupled with other debt issues, Railtrack plunged from profit to a loss of £534m, causing it to approach the government for funding, which it controversially used to pay a £137m dividend to its shareholders in May 2001. This was the last straw for the increasingly impatient Labour Government, which 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 was frozen at the time the company went into administration and was 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 262p per share was enough to convince the larger shareholder group, the Railtrack Action Group, to abandon legal action. The Chairman, Usman Mahmud, believed that there was little chance of success pursuing legal action. The smaller Railtrack Private Shareholders Action Group continued to press its claim. The trial of this claim against the Secretary of State for Transport commenced in the Chancery Division of the High Court on June 27, 2005 and ended on July 21, 2005; judgement against the shareholder group was given on October 14, and the group decided not to appeal.

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 were claimed to undermine the Government's case that the Company had ceased to be commercially viable and a long and politically embarrassing legal battle looked likely.

Railtrack Directors

Gerald Corbett was the company's Chief Executive from 1997 until his resignation on 2000.

Geoffrey Howe was elected Chairman in 2002 to seek compensation for shareholders. He stepped down a few months later when the Government offered 262p per share.

Payments to shareholders

RT Group plc (in voluntary liquidation) has made a number of payments to shareholders during the winding up of the company's affairs.

December 2003 200p August 2004 43p December 2004 9p December 2005 8.5p There will also be a payment of 1p per share in 2008.

External links

Post-privatisation British railway companies | Rail transport in Great Britain | Monopolies

Railtrack | Railtrack

 

This article is licensed under the GNU Free Documentation License. It uses material from the "Railtrack".

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