Planning to get back on the rails

Tranz Rail's moment of truth comes at 4pm on Tuesday.

Managing director Michael Beard and chief financial officer Michael Collins will unveil to financial analysts and journalists at Auckland's Stamford Plaza hotel a plan they hope will renew investor confidence in the rail operator.

The move cannot come too soon for the big institutions and smaller shareholders who have lost a packet on their shares at today's values.

Tranz Rail's share price has fluctuated wildly since the market got wind it would post a dismal financial result next month.

The company also faces allegations of indulging in creative accounting to enhance its profitability and not properly telling investors of some liabilities it faces from its decision to sell and lease back assets such as Cook Strait ferries.

Adding to the general angst is the grumbling from shareholders who believe they were sold a pup when they bought shares at levels much higher than yesterday's closing price of $2.25 a share, after Tranz Rail's former controlling shareholders quit.

Merchant bankers Fay Richwhite and Wisconsin Central, now under Canadian ownership, sold their stakes at $3.60 and $3.70 a share respectively in February.

Beard will need all his polish and affability on Tuesday.

The market was astounded when the Herald revealed last week that the board was still stacked with Fay Richwhite and Wisconsin-associated directors. Beard and Collins have told analysts their ability to take hard decisions on the company's asset values is not hobbled by these directors' continued presence.

But replacements are expected to be announced soon.

Beard has made major changes to Tranz Rail under which a raft of under-performing assets have been sold and big parts of the business given to outside contractors.

Tranz Rail does have a big point in its favour. It owns a strategic asset in the national rail network, which the Government wants better used for the country's economic benefit.

As one analyst notes: "These guys have problems but there is a good chance they will be bailed out by the Crown.

"The Crown's already taken the first step by paying $81 million for the Auckland network, and will probably do something for Wellington.

"If they put one or two people on the board who have got contacts with the Government and the ability to twist arms in Wellington, it could be very advantageous to them."