Tranz Rail attempts to explain

By PAM GRAHAM

Tranz Rail's management fronted to institutional shareholders sick of excuses and wary of losses yesterday and dismissed credit rating company Standard & Poor's.

It also emerged the rail freight operator has spread a final payment to cut its bank debt, due in March, over three months.

The effort to explain the profit warning that sliced 19 per cent off the share price on Monday did little to improve it. The stock closed just 2c higher at 79c. Anyone who bought in when cornerstone shareholders sold a year ago is wearing a 78 per cent loss. Brokers said overseas institutions were selling and "mums and dads" were buying.

Simon Botherway at Brook Asset Management said the firm should be broken up, while some analysts remained resolute believers in the long-term outlook.

The mood at the meetings of institutional shareholders and analysts with chief executive Michael Beard and chief financial officer Wayne Collins in Auckland and Wellington yesterday was said to be disappointment and resignation.

"I thought: 'Here we are to listen to the spiel again,"' said one analyst.

Tranz Rail said it had been given longer by its bankers to make a $14 million payment due in March - part of a deal last year to reduce the size of its banking facility.

"We could have coped with it but the banks changed it to $5 million, $5 million and $4 million over the next three months," said Collins. Asset sales had been expected to facilitate the reduction in the loan facility, an analyst said.

The Herald understands Tranz Rail asked its bankers for the extension to the final payment and they, like shareholders, want to see asset sales and are disappointed with the firm.

The relationship with credit rating company Standard & Poor's was over. Collins said the credit rating was no longer required by any funding provider.

Standard & Poor's had the company on review with a negative outlook and a downgrade was expected.

Tranz Rail is also looking to replace the Lynx fast ferry with a cheaper model and a charter of a freight vessel to reconfigure its Cook Strait business.

Not running the Lynx during winter months would save $6 million of costs, though a reduction in the charter from 12 months to seven months a year had already been assumed in the company's forecasts.