Norris firm's slice of Tube windfall

CONTROVERSIAL Tube maintenance company Jarvis, headed by would-be London Mayor Steve Norris, is to share in a £30m Underground refinancing windfall, a deal that will hand City advisers an astonishing £61.5m in fees.

Tube Lines, the company that now runs the Jubilee, Northern and Piccadilly lines and is co-owned by Jarvis, is close to agreeing a £2bn refinancing of bank loans with a taxpayer-guaranteed, major bond issue.

A year after it landed the controversial, 30-year part-privatisation contract, details of a redrawing of that contract and its financing go before the board of Mayor Ken Livingstone's Transport for London directorate today.

The aim is to take advantage of lower interest rates to deliver substantial savings on the original debt financing.

However, documents seen by the Evening Standard reveal that two thirds of the immediate savings of the refinancing are going straight into the hands of the private sector rather than on much-needed Tube investment or capping of rising Underground fares.

As a result of the refinancing, Tube Lines owners - Jarvis, US giant Bechtel and Amey - are to take £30m out of the business immediately.

The payout breaches the maximum annual payments allowed under the original public-private partnership agreement. So, at the behest of Tube Lines, 'substantial' amendments are needed to re-word the contract. The payout to Tube Lines' owners comes after its City advisers are due to be paid £61.5m for work on the refinancing.

Tube Lines refused to comment on who will be getting the money but the company's long-standing City advisers include HSBC, Australian bank Macquarie, lawyers Lovells and accountants KPMG.

A spokesman for Tube Lines said: 'Nothing has been settled yet so we cannot comment on the details.'

The windfall once again puts the spotlight on Steve Norris, who has continually denied any conflict of interest between his chairmanship of Jarvis and his Conservative candidature for London Mayor.

Details of the refinancing put to TfL by Tube Lines state: 'Tube Lines wishes to receive a significant portion of the gain upfront...therefore it is necessary to amend the documentation.'

It also show Tube Lines requesting 'a change to service contract' to enable it to pay its owners more than the £14.4m it has been capped at for 2004.

The savings from the refinancing are worth an immediate £48m to TfL, which it says will be used to reinvest in the Underground.

About £1.9bn of Tube Lines' debt is in the hands of banks led by Societe Generale, the European Investment Bank, WestLB and HBOS. That is to be replaced by £2bn of bonds maturing up to 2029. The majority are initially backed by DePfa, a Dublin-based public-sector financier, and it is planned that some bonds will be offered to the public at some time.