Nat Express ex-chairman hits at DfT

National Express could have survived as an independent company if it had better managed its relationship with the Department for Transport, its former chairman has said.

The comments come as the troubled bus and rail operator prepares to accept a £765m bid by a Spanish-led consortium. The Spanish Cosmen family, which owns 18.6 per cent of the group, and private equity firm CVC have until Friday to complete the due diligence and either make a 500p per share offer or walk away.

David Ross, National Express chairman until December, said that the company had been in a perfect position at the end of last year to raise capital and renegotiate terms with banks on its then-£1.2bn debt mountain.

But "the falling out with the Department for Transport had made that difficult".

It is thought that the Cosmens were also unhappy with the confrontational manner with which National Express handled the relationship with the DfT as it tried to renegotiate the terms of its contract running the recession-hit East Coast mainline.

"If there hadn't been tensions between the board and the Cosmens they wouldn't have bid for the company," he said. "They had been a long-term supportive shareholder and plenty of businesses have raised capital in the past year."

The Cosmens and CVC are now proposing a break-up of the company, having agreed to sell National Express's UK rail and bus businesses to Stagecoach, the public transport group.

The DfT has given its tacit approval to the consortium by agreeing to transfer National Express's remaining two rail operations - c2c and National Express East Anglia to Stagecoach - in a £100m deal. Stagecoach has also run into conflict with the DfT over its south west train services but is said to have remained on better terms with Lord Adonis, transport minister.

While National Express insists that a rights issue remains a viable alternative, most analysts expect the deal to go ahead. The company has debts of £977m, some of which threaten to breach the terms of its loan conditions.

Although some investors have indicated their support for a cash call, it would have to take place alongside a legal battle with the DfT over whether it can retain its remaining two rail franchises.

It is also searching for a new chief executive, following the resignation of Richard Bowker in July. With this in mind, most investors are thought to be inclined to accept the offer.

The due diligence process is expected to be short because the group has recently completed the first half of its financial year and as majority shareholders the Cosmens had a thorough understanding of the company.

The company ran into trouble after negotiating the most expensive rail contract in history. Under a deal struck at the height of the economic boom, National Express agreed to pay the government £1.4bn to run the London to Edinburgh railway line until 2014.

The agreement assumed passenger growth of 10 per cent, but the slowdown in commuter and leisure travel has taken its toll on profits and in July the company said it would hand the management of the franchise back to the government later this year.

Mr Ross, who is currently producing a report assessing the financial viability of a high-speed rail service, quit as chairman of National Express last December after admitting that he had used a stake in the company as collateral for loans.

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