Byers faces Railtrack court threat

BIG City investors will turn up the heat on embattled Transport Secretary Stephen Byers this week, threatening to drag his plans for a new-look Railtrack through a lengthy court case. Shareholders want the Government to agree a value for Railtrack's assets so they can calculate compensation after Byers put Railtrack into administration last month.

Tuesday's meeting between Byers and the Railtrack Shareholders Action Group could be a stormy affair as the Transport Secretary is refusing to compensate shareholders. But with the Minister under increasing pressure, the shareholders scent blood.

Investors believe the assets have a net value of at least £1bn because of development opportunities on Railtrack land. At this value, the company's shares would be worth £3.60. The shares were suspended at £2.80.

Investors are threatening to issue a High Court injunction or sue Railtrack administrator Ernst & Young if assets are undervalued when handed to the new owner. 'We can block the administration so that it gets bogged down in the courts for years if we don't get fair value,' said a well-placed source.

Investors fear Byers wants a not-for-profit company to take over the network for a nominal sum, while inheriting Railtrack's £8bn liabilities. The move would meet Byers' aim of not giving taxpayers' money to the shareholders. The Government is just weeks away from announcing a chairman for the new organisation, possibly Railtrack technical director Richard Middleton .

Financial Mail has learned that any transfer of Railtrack's assets to a not-for-profit company could take three years because complex contracts would have to be renegotiated, according to lawyers. The delay could bring much-needed investment in the network to a standstill.

Investment bank Merrill Lynch has been retained by an unnamed utility company to work on a proposal to buy Railtrack property assets such as stations and retail outlets.