Wednesday July 1, 09:26 AM
UPDATE 2-National Express to give up East Coast franchise
By John Bowker
LONDON, July 1 (Reuters) - British transport operator National Express (LSE: NEX.L - news) , a takeover target, is to hand a major rail franchise back to the government, after the recession hit its business plan for loss-making London to Edinburgh trains.
Shares in National Express, which rejected a takeover bid from rival FirstGroup (LSE: FGP.L - news) on Monday, fell 8.2 percent to 284.25 pence by 0810 GMT after a government minister said it could lose other franchises.
National Express, which had the East Coast rail franchise until 2015, said financing for the business was now expected to run out later on this year. Handing the franchise back should not affect its other rail franchises, it said.
Britain's transport minister, Andrew Adonis, did not agree.
'The government believes it may have grounds to terminate these (other National Express) franchises, and we are exploring all options,' said Adonis, adding he would set up a public company to operate the East Coast franchise.
CEO LEAVING
National Express said chief executive Richard Bowker, the former head of Britain's Strategic Rail Authority who negotiated the terms of the 1.4 billion pound East Coast agreement, would leave the company to head up the yet-to-be-built railways of the United Arab Emirates.
National Express has struggled with falling passenger numbers twinned with extensive premiums it pledged to pay to the government when it won the East Coast franchise.
Chief operating officer Ray O'Toole told reporters the company had not reneged on any commitments to the government to date, blaming the problems on the recession.
'We are not in default of any of our franchise commitments. Services, passengers and staff will be unaffected by what is going on,' he said.
He said he 'did not understand' Adonis's statement that the company could lose more franchises,' and that Bowker's departure was unconnected to the problems at the group.
National Express said the performance of the East Coast route would hit first-half profit, and the franchise would make a loss of 20 million pounds.
The company has been working to manage a billion pound debt-pile, and has not ruled out a rights issue.
National Express said it had tried and failed to renegotiate the terms of the franchise with the government, and could only commit to funding it later in 2009.
It will become the second company in three years to be stripped of the East Coast rail franchise after GNER in 2007.
(Reporting by John Bowker; Editing by Hans Peters and Dan Lalor)
($1 = 0.6029 pound) Keywords: NATIONALEXPRESS/
|
|
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
