Railtrack

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Railtrack is the name of a British company which was founded under Conservative legislation that privatised the British railway system and has since been taken into receivership under the terms of that legislation.

This was welcomed at the time by groups that represent British train passengers.

The company has been severely criticised for both its performance in improving the railway infrastructure and for its safety record. The British government has put the company into receivership 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 legislation that created it prevents the actual infrastructure being sold to pay debtors.

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.

Shareholders initially received no compensation nor were they promised any. The Government considers that the act of liquidation was valid as it performed under terms set out in the privatisation legislation. That view is likely to be challenged in the courts in 2002.

Railtrack's parent company, Railtrack Group, still exists as do the various diversified businesses it created to seek to protect itself from the loss-making business of running a railway. £370 million held by Railtrack Group were frozen at the time the company went into receivership have been earmarked to pay Railtrack shareholders an estimated 70p per share in compensation. The Group has an interest in the partially built Channel Tunnel Rail Link that might well be sold to raise funds.

Railtrack shareholders have formed two groups to press for increased compensation. A lawyer speaking for one of those groups has 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.

It was reported (23 Nov 2001: The Guardian newspaper) 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 looks likely.