KEY RATING DRIVERS FOR THE SUCCESSOR COMPANY
Capital expenditure upgradesrequirements
to undertake certain projects, and specific targets for specific
Investment obligations in non-core business
(eg railway company SPVs).
Operation and maintenance obligations. Key measures
Cost reduction/efficiency targets.
Physical state of the assets and likely variability
around the operation and maintenance cost base.
"Base Case" costs of capital projects
and likely variability around them.
Business plans for meeting required performance
objectives. Methodology of implementation (Business Model/Management
structures/Sub-contractual structures (if relevant)).
Track record of management and views on management
competence going forward. Background and experience of management
Ability to deal with unforeseen events.
"Base Case" revenues under CP2 (and
most likely framework for CP3).
Variability around revenues.
Potential Penalties for under-performance.
Regulatory Provisions for dealing with increased
and/or unforeseen costs.
"Base Case" cash flow, profit and
loss and balance sheet projections.
Funding Plans and contingencies built into funding
Sensitivity to interest rate changes.
Liquidity (availability of standby lines of
credit and short term cash resources) to cover temporary reduction
in cash flow or loss of debt markets.
As can be seen the financial structure of Railtrack
is only a part of our analysis, albeit an important part.