National Express launches £360m rights issue

| November 11, 2009
”National

Bus and train operator National Express has today announced plans to raise £360 million via a rights issue, which will strengthen its balance sheet as it struggles under a mountain of debt of £1.5 billion.

Shares in the transport group lost 7.9% at 311p in early trading today. Shares in the group have lost almost a third in value in the last month.

National Express will issue around 357 million shares at a heavily discounted 105p per share and will be on a seven-for-three basis, fully underwritten by Merrill Lynch and JP Morgan.

On Friday, the transport group is set to give control of its East Coast main line franchise. Transport Secretary, Lord Adonis, said that the Government would keep the franchise until 2011, when a new operator would be found.

In a statement today, the company said: “National Express has taken and received advice from leading legal counsel upon its, and its subsidiaries’, positions under the National Express East Coast and other franchise agreements.

“On the basis of that advice, National Express considers that it may have grounds to challenge any purported declaration by the DfT of cross default of the National Express East Anglia and c2c franchises on the basis of termination of the East Coast franchise agreement.”

“Whilst the group will therefore oppose any attempt by the DfT to assert any purported right of cross default, it nonetheless remains open to further discussions with the DfT with the objective of safeguarding the interests of all stakeholders,” it added.

The rights issue comes shortly after the company issued a profit warning and also confirmed that talks over a possible tie-up with rival bus and rail group Stagecoach had ended.

The company has been the subject of takeover speculation since it unveiled a loss of £20 million in the first half of 2009 on its East Coast route.

Last month, a Spanish-led consortium, which comprised private equity firm CVC Capital and National Express’s largest shareholder, the Cosmen family, withdrew a £765 million takeover offer for the company.

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