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As of Oct. 8, Railtrack PLC found itself in privatization limbo, neither truly privatized nor government run.
That’s because Great Britain's high court approved the government's request to place Railtrack under government-appointed administrator control, in this case accounting firm Ernst & Young LLP.
Railtrack, which governs the infrastructure needs of Britain's 20,000 track miles, ran aground Oct. 5 when Transport Secretary Stephen Byers rejected Railtrack's public fund request of $1.05 billion by December and another $1.5 billion by March to help the financially-strapped company.
In the absence of additional government funding, Railtrack officials agreed there was no other alternative to being placed under administrator control.
"In light of the increased investment required to safely operate the railway and continuing cost pressures on certain major projects, [we] recognized the need for a complete review of the financial position of the group and appointed new financial advisors to facilitate this," said Railtrack Chairman John Robinson in a prepared statement. "[We're] extremely mindful of [our] duty to protect the interests of shareholders and creditors, but under current circumstances, and recognizing the duty of the administrator also to act in the interest of both shareholders and creditors, we have concluded that we should cooperate with the administrator in ensuring a smooth transition."
In the wake of the transition, Railtrack Chief Executive Officer Steve Marshall Oct. 8 resigned, stating that the government's treatment of Railtrack and its shareholders "has been shoddy and unacceptable."
Marshall believes Railtrack held its nerve post-Hatfield — a high-speed train crash Oct. 17, 2000, that killed four, injured 35 and, along with other recent crashes, brought to light serious infrastructure deficiencies — and in recent months had made progress on improving infrastructure performance.
"It is an odd time for the state rug to be pulled from under us," he said in a statement released Oct. 8.
Odd time or not, Ernst & Young now will call the shots at Railtrack, which was privatized in 1996 to control former government-run British Rail's tracks, signals and stations.
However, British Prime Minister Tony Blair recently stated that the country's rail network wouldn't be re-nationalized. Instead, Railtrack over time would be replaced by a private company devoid of shareholders that would reinvest profits into the railroad.
For now, Secretary Byers claims Railtrack won't lay off any of its 11,000 workers.