National Express set for cash call
Rumours in the city today suggest that National Express is set to ask investors for an additional £400 million as the fallout from the East Coast mainline saga continues. As we covered in some of our recent posts, the company was forced to give back its franchise to the East Coast mainline as losses continued to mount and the company could see no way out the predicament. There will be a significant loss to the UK taxpayer as National Express has ended its agreement with the government early and indeed there may be further repercussions for the company.
National Express also holds two other rail franchises in the UK, both of which are profitable, and is seemingly ready for a battle with the UK authorities regarding these franchises. On one hand the government believe the company cannot hand back one franchise because it was loss-making and retain two others because they are profit-making. However, the company believes that there are no grounds for calling in the profitable franchises and the fight seems set to go to court.
National Express appears to require the additional £400 million to pay down existing debt and position the company for the eventual recovery in the UK economy. There will also be significant court costs and potential fines with regards to the East Coast mainline situation and its other two rail franchises.
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