New train strategy off the rails

THE Government's bold new train strategy suffered a derailment only a day after its launch when a group of bondholders in Railtrack failed to waive their rights to call in the company's debts. It was the latest in a long string of setbacks for Transport Secretary Stephen Byers.

Most bondholders approved a deal giving the Government a breathing space to set up a replacement for Railtrack. But holders of £400m of convertible bonds only voted 73% for the deal, which required 75% backing. That means nearly 10% of Railtrack bonds face default.

Earlier, two other groups of bondholders backed the compromise, agreeing to waive their rights in return for the Government making interest payments for up to three years.

Analysts said the convertible bondholders vote left them 'out on a limb' and 'taking their chance against the Government'. They have the right to call in their loans.

Railtrack administrators Ernst & Young said the next move was up to Byers. 'The Secretary of State needs to decide what he wants to do.'