Stagecoach risks £600m US rail bid

STAGECOACH founder and chief executive Brian Souter is about to test his shareholders' faith yet again by plunging into the traditionally risky American railway business.

Souter, who returned to the helm of the transport company three weeks ago with the surprise departure of chief executive Keith Cochrane, is pressing ahead with a bid to run the T, Boston's troubled commuter rail franchise.

Sources close to the talks say Stagecoach and its highly regarded American partner, transport and construction group Herzog, are favoured to secure the contract, beating off two other shortlisted bidders. Stagecoach has had a chequered career in America and in rail and Souter will struggle to convince investors that the Boston venture will pay off.

Cochrane's departure coincided with disappointing results from the company's Coach USA subsidiary. Stagecoach's 49%-owned rail franchise venture with Virgin Rail has also caused problems. Accounts show Cochrane's pay package was worth £522,000 last year.

The T contract, which would be Stagecoach's first foray into the US rail industry, is unusually risky. It requires operators to accept liability for passenger injuries and the cost of maintaining equipment and ageing infrastructure.

Sources close to the company said that Stagecoach is confident it can win the five-year contract, which could come with a price tag of close to £600m.