Liquidator lines up Railtrack surprise

RAILTRACK shareholders have had a surprise present from liquidator Jamie Smith. He sent out his third set of cheques on Christmas Eve for 9p a share, taking the total payout to 252p a share. He hopes to make a fourth payment of 5p to 8p during 2005.

Smith, of accountants Deloitte & Touche, has been working steadily to boost recoveries, which could now reach his upper target of 260p a share. That compares with an initial price of 365p to 380p for investors who bought Railtrack at privatisation and up to £17 during its glory years.

The cheques landed on the doormats of more than a quarter of a million Railtrack investors over the Christmas break. The vast majority of them held less than 5,000 shares - meaning most payouts will be no more than £450.

But the outcome is much better than appeared likely when the group collapsed in 2001, crippled by debts of £3.3bn.

At the time, Transport Secretary Stephen Byers forced the faltering company into administration in October that year, as he refused to hand over more cash to keep it afloat. At that point, the company needed £700m in two months, rising to £1.7bn within six months.

The winding up has now returned £1.3bn to investors. Total costs over two years came to £17m, dropping to £4.3m in the second year. Deloitte's costs were £568,000, or £390 an hour.

With future payouts likely to be small, Smith has set up a scheme with the charity share donation scheme ShareGift so that shareholders who wish can give their remaining entitlements to charities including the south Asian tsunami appeal. The chances of any further recoveries depend on a legal action being brought by investor Geoffrey Weir on behalf of 55,000 members of the Railtrack Private Shareholders Action Group, which is due to be heard in June.

Lawyers for the action group claim to have discovered embarrassing e-mails which will help their argument that former Transport Secretary Byers acted unlawfully in forcing Railtrack into administration. The case is a complication for Byers at a time when some expect him to return to the Cabinet.

Disgruntled shareholders may also use the new Freedom of Information Act to access sensitive government files which they hope will boost their case.

Under the Act, which came into force on January 1, the government must disclose information within 20 days of a request, and if it refuses, the case will be passed to an independent arbiter. Destroying documents is a criminal offence.

The Office for National Statistics made a controversial ruling in October 2001 that a proposal to give £5bn of state grants would be classed as government borrowing, reversing an earlier decision. The uturn by the ONS led Byers to put Railtrack into administration, wiping millions off its value.

The Department of Transport has said it will defend itself robustly.