'Railtrack administration costs not excessive'
Insolvency practitioners have defended administrators at Ernst & Young after the high costs of the Railtrack administration prompted harsh criticism when they were revealed this week.
Link: Deloitte to liquidate Railtrack
The 12 month administration procedure cost taxpayers £70m in adviser fees and bonuses, with £20.4m going to Alan Bloom and his 30-strong Ernst & Young insolvency team.
The Big Four firm’s fees include a £58,000 taxi bill, and a £15,000 invoice for breakfasts and dinners. £29.8m went to E&Y’s advisers, including Deutsche Bank, which submitted a £14m bill and law firm Slaughter & May, whose fees were £8m.
But insolvency practitioners have said these was not necessarily excessive due to the size of the administration. One said: ‘It is easy to look at big numbers and say that it’s excessive, but, given that it was the administration of the national railway network, it was probably justified.’
Although the fees are arguably the biggest for an administration in the UK, they are not the biggest globally – the bill for the Bank of Credit and Commerce International’s administration, which took ten years, came to more than £600m.
Five of Railtrack’s former senior managers were paid a total of £1.8m, including Sebastian Bull, the former finance director, who received £216,000 in bonuses and a £300,000 pay-off.
Railtrack went into administration in October 2001 under a Special Railway Administration Order, nicknamed the ‘Byers’ bill’ after former transport secretary Stephen Byers who declared the company insolvent.
The company came out of administration one year later as a new ‘not for dividend’ business, known as Network Rail. The new company operates with the help of £21bn in loans and grants.
