National Express launches rights issue

TROUBLED public transport group National Express today launched a �360 million cash-call to improve its battered balance sheet.

TROUBLED public transport group National Express today launched a �360 million cash-call to improve its battered balance sheet.

The group, which faces a Government threat to strip it of its rail franchises in the East of England following the collapse of its East Coast operation, will ask its shareholders to stump up the money in order to pay off a chunk of its �1.1billion debt mountain.

National Express is pressing ahead with the rights issue without the backing of its largest shareholder, the Spanish-based Cosmen family.

Jorge Cosmen, who last month pulled out of an attempted takeover of National Express, initially indicated that he would support the planned fund-raising.

However, he then expressed concern that National Express had acted too swiftly in rejecting a subsequent merger approach from rival transport operator Stagecoach.

The National Express East Coast franchise will revert to public control at the end of Friday this week.

Most Read

The group announced in July that it planned to walk away from the loss-making operating following the failure of an attempt to renegotiate the terms of the franchise deal, which it signed before the onset of the recession and a subsequent collapse in revenues.

Transport Secretary Lord Adonis warned at the time that the Government could strip the group of its other rail franchises - National Express East Anglia and south Essex commuter route c2c - under “cross default” clauses, and Ipswich MP Chris Mole, a junior minister at the department, confirmed last week that this remained under consideration.

National Express insists that, having pumped in the full �40million of funding for the East Coast route to which it was committed under the franchise, it has complied with the terms of the deal and that the cross default provisions in the other franchises do not apply.

Any attempt by the Government to carry out its threat is therefore likely to be resisted by National Express in the courts, and a successful round of funding would further undermine the case for declaring the group incapable of running its remaining franchises.