TfL FD explains Metronet funding decision
TfL finance head says decision to cut off debt guarantees was correct
The decision to refuse to guarantee new debt raised by Metronet has been
defended by Transport for London’s recently appointed finance director Stephen
Allen.
Metronet, the consortium responsible for two thirds of the work on upgrading
the London Underground, was plunged into administration when TfL would only
supply the group with £121m of the £551m it had requested.
Allen told the FT that the decision not to continue guaranteeing new
debt raised by Metronet was the right one. Up until the decision was made London
Underground had always promised guarantee Metronet’s borrowings.
Allen explained that London Underground and TfL had told Metronet, in a
letter on 29 June, that they would no longer be able to guarantee any future
borrowing the contracting group would take on.
The decision effectively pushed Metronet over the edge, as the letter meant
that Metronet could no longer turn to its banks for cash and had to ask for the
£551m rescue loan from London Underground.
‘If we were to undergo the same process again, we would send a similar letter
in the blink of an eye. It’s very clear that what pushed Metronet into
administration was the financial difficulties created by the company,’ Allen
said.
Further reading:
Transport for London announces interim FD
Ernst & Young to move in at Metronet today
Tories demand NAO probe of Tube PPPs