Toll mulls putting more money into rail

By PAM GRAHAM

Tranz Rail's new owner is considering investing twice as much as promised in last year's track buyback deal to rebuild the rail operator.

The deal had the Government buying back the track for $1 and spending $200 million over five years to improve it.

Toll Holdings of Australia agreed to invest $100 million over five years in rolling stock.

Capital expenditure plans for Tranz Rail were still being developed but $40 million a year was possible, said Toll's chief financial officer, Neil Chatfield.

He said the amount in the first year could be lower because it took time to get to know the business and there were lead times in ordering new equipment.

Toll had put about $182 million into the company.

It is signalling a refinancing of as much of $350 million either later this year, or early next year.

Tranz Rail has a $100 million bond issue maturing in October.

Debt, or hybrid debt and equity instruments such as capital notes, would be considered.

"We'll probably need shareholder support in most of these things," Chatfield said.

Meanwhile, Toll has fired the company's group general manager of rail services, Noel Coom.

Senior management contracts at Tranz Rail could be terminated by either party if the company changed ownership, triggering payouts of between 12 and 24 months' salary.

Chief executive David Jackson acknowledged Coom's contribution to Tranz Rail in a memo that said the decision was made because of the changing structure of the company.

The change of ownership of Tranz Rail had two expensive consequences - the loss of $250 million of tax credits and up to $6 million of redundancy costs for senior managers - according to information provided to shareholders during last year's battle for the company, now 84.2 per cent owned by Toll.