National Express confirms £360m rights issue
NATIONAL Express confirmed today that it is to raise £360m through a rights issue.
The transport operator, which is due to hand over the running of the East Coast rail franchise to the Government on November 14, said that due to “unprecedented turmoil and disruption” in the global financial markets it now had a level of debt above the UK transportation average.
The group’s net debt is around £1.1bn including a £20m loss on the East Coast line. National Express paid £1.4bn to run the route, based out of York.
In October, a consortium led by Spain’s Cosmen family announced it had decided not to make a takeover offer for the business.
Talks over a merger with Stagecoach, which had made a deal with the consortium regarding the possible acquisition of National Express’ UK bus and rail operations, were terminated by National Express at the end of last month.
As a result of today’s announcement, National Express said it believed its other rail franchises – National Express East Anglia and c2c – would not be terminated as proposed by the Department for Transport (DfT).
It said it had taken legal advice and was confident it may have grounds to challenge any purported declaration by the DfT of cross default of the National Express East Anglia and c2c franchises on the basis of termination of the East Coast franchise agreement.
However, it said that while it would oppose any attempt by the DfT to assert any purported right of cross default, it remained open to further discussions with the objective of safeguarding the interests of all stakeholders.
John Devaney, executive chairman of National Express, said: “The launch of today’s rights issue significantly reduces the group’s net debt to a more sustainable level and allows management to focus on value creation for shareholders rather than short term debt management.
“National Express continues to deliver resilient operating performance despite challenging trading conditions. Our strong cash generation has been restored and we are committed to achieving excellence in service delivery to all of our customers.”
He added: “We have substantial confidence in our future and believe that the actions we are taking to strengthen our balance sheet provide us with the flexibility to pursue the group’s longer term growth objectives and maximise shareholder value.”
As of November 14 the East Coast franchise will be operated by a new government-controlled group called Directly Operated Railways (DOR).
