Big investors seek Railtrack payout

AT LEAST two major funding projects are looming which will add force to a stark warning from the City to the Government to pay up over Railtrack or else.

The Treasury insisted on Wednesday night it had not yet received a letter from more than 20 top investors warning that the Government faces higher interest payments on private sector loans for infrastructure projects unless it compensates Railtrack shareholders, who lost heavily when it was forced into administration last year.

The investors, who include Hermes, Morley, Clerical Medical, and Invesco Perpetual, will not say how much extra the Government will pay. Sources say it could be a full 1% a year extra. On the £30bn needed for railway improvements, that comes to £300m a year. And, as it has similar plans for hospitals, roads, prisons and schools, the cost to the taxpayer could be still higher.

'The situation is salvageable by going back and reviewing what has happened. We would be happier without recourse to the courts,' said Clerical Medical chief investment officer Michael Deakin, who signed the letter.

Crunch time is imminent, as the Government has approached the City for £1.5bn to fund the refurbishment of London's underground. In May it also hopes to raise a further £3.9bn to repay its loan to Railtrack's administrator.

The Treasury said: 'The Chancellor, like the Prime Minister, fully backs the decision to put Railtrack into administration.'