UK: Taxpayer picks up £1.7bn Metronet tab

The Telegraph ^ | 2/7/08 | Alistair Osborne

[bruinbirdman]

Taxpayers have been forced to pick up a £1.7bn bill to cover sums lent to collapsed London Underground maintenance company Metronet by some of the world's biggest banks, including Royal Bank of Scotland.

The upshot is that the taxpayer has bailed out
Metronet's lenders

The charge was announced yesterday by Transport Secretary Ruth Kelly, providing fresh ammunition for critics of the public private partnership (PPP) on the Tube, which was so enthusiastically championed by Gordon Brown in his previous guise as Chancellor.

Metronet crashed into administration in July, leaving its five shareholders - WS Atkins, Balfour Beatty, Bombardier, EDF Energy and Thames Water - with losses of £70m each.

However, under 2003's PPP contracts, the Government effectively guaranteed 95pc of Metronet's borrowings. The guarantee, otherwise known as the "put option", became enforceable six months after any PPP administration. It was exercised on Tuesday.

The upshot is that the taxpayer has bailed out Metronet's lenders - the same ones that refused to put more money into the company when Transport for London, the authority responsible for the Tube, refused to offer similar guarantees for any additional loans.

The banking syndicate, led by RBS, included the European Investment Bank. Monoline insurers Ambac and FSA were among the largest bondholders.

Shadow Transport Secretary Theresa Villiers said: "The taxpayer is picking up a £2bn tab for Gordon Brown's incompetence when he set up the Metronet PPP."

The Government has made available a further £300m, partly to cover the costs of running Metronet in administration.

Administrator Ernst & Young estimates costs of £180m to March 31.

[bruinbirdman]

Gotta keep that leech moving at least through the London Olympics. Probably, this expense in comparable to Amtrak.