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Sea Containers 'ready to sell GNER' to avoid bankruptcy

EAST coast main line train operator GNER could be sold by its troubled shipping owners in an attempt to stave off bankruptcy in the United States, it was reported yesterday.

Bermuda-registered Sea Containers is thought to hope to receive 200 million for the firm, which was awarded a new ten-year passenger franchise last year.

Sea Containers, which is listed on the New York Stock Exchange, was said to have breached several lending agreements with its bankers and needs the money to settle debts and restore liquidity.

The reports said the only alternative to a sale would be for Sea Containers to seek Chapter 11 protection from creditors in the US, but that would lead to a breach of its UK franchise and could result in the company being stripped of the contract.

An industry source told The Scotsman yesterday: "The sale of GNER would be a surprising development, since Sea Containers' core strategy is focused on ferries and rail, but in business you cannot rule anything out."

Last month, the firm wrapped up a $594 million (323m) deal to offload ferry operator Silja Line and said it had substantially reduced overheads.

The disposal of the Baltic Sea operator was seen as a key element of the company's plans to secure short-term liquidity. It also delayed publication of its annual results while the attempts at restructuring continued.

GNER provides rail services between London and Edinburgh, Glasgow, Inverness and Aberdeen. Last month, it pulled out of the race for the new South Western franchise, admitting resources were needed elsewhere. Sea Containers also cited "current challenges" for its decision to pull out of the process.

More significantly, it is awaiting a decision following the end of a week-long appeal hearing at the High Court in London against the Office of Rail Regulation's (ORR) decision to allow a rival operator to run services on the east coast line.

GNER will pay the government 1.3 billion for its franchise, and claims Grand Central will significantly cut its fare revenue because the new firm's Sunderland-London trains will also call at York.

It has also warned - with the backing of the Scottish Executive's Transport Scotland agency - that the move could see some Scotland-London trains cancelled or delayed by up to half an hour.

The ORR has countered that the effect of Grand Central's plans on GNER services would be "either negligible or none at all".

GNER, which has run trains on the line for ten years, won its latest franchise after beating off competition from rivals that are seen as potential bidders should the operator be sold off by Sea Containers.

They include Aberdeen-based FirstGroup, which is Britain's biggest train and bus firm, and Virgin Trains and Stagecoach, which jointly run the two Virgin rail franchises.

 
 
 

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