Llangollen Railway

When the current situation happened, it was mentioned that it was a result of the engineering business and its liabilities for outstanding work and claims against it. I see no reason why Llangollen rail mk2 should not be successful since they are not going to be involved in contract engineering

 

They should not be aiming to get back to where they were they need to get to operating in a way which is sustainable and with minimal paid staff to cover the administration. You can not rely on donations for ever.

 

I've yet to see a preserved railway that doesn't rely at least in part from donations (and if you consider that a portion of discretionary spend is done to put money in the railways coffers and so so in effect a donation, that figure jumps)

 

Railtrack was a creature of statute and had it's own specific administration procedure (or the admin would have had to look at eg, selling the rail for scrap).

 

Indeed a combination of this and having no engineering business should make it more sustainable.

Unfortunately this probably means fewer resident locos and more reliance on hired in motive power, which can he handed back once the boiler ticket expires without the liability of overhauling it. Foxcote Manor and 6430 already gone. 5199 unlikely to return. The three Trust owned locos up for sale, with only the hope that the new owners might choose to keep them at Llangollen.

 

That's not quite correct. The duty of the receiver is to get his (lets say £350k) back.
The test for any insolvency is being able to meet their debts as they fall due. If you owe a million quid next week, you aren't insolvent until the earlier of next week, or the point at which you know you aren't going to have a million quid coming in.

Once you satisfy the reciever, then the IP looks at what is due in and due out. The IP is duty-bound to see if the entity (or parts of it) can be saved. That's one reason they have put the option to sell the whole shebang.

In effect the creditors will be presented with a choice of "take x p/£ now, or spin the wheel under [whatever the plan is], and keep going" voting rights are generally per £of debt, but with preferential creditors (the other secured bank monies, some taxes and some employee payments) having a bigger say.

If you sell the carriages, but still have other income streams, then the creditors may accept (some) jam tomorrow. If not, then you are into distribution of assets. Which may include the purchase of an aspect of the business.

As long as the business is running, debts are only liabilities when they fall due.

 

The question I'd ask though is why did the LR diversify into contract engineering in the first place? Presumably it was because of a desire to generate, and diversify, their income. Obviously the cost base of different railways varies, but I suspect "running trains will pay for itself" is a business model that most heritage railways struggle with, hence the different "value add" businesses they run. Engineering is one such "value add", but as with all such things, if the value-add business doesn't actually add value, falling back on the "core" business is not necessarily a steady guarantee of profits.

Tom

 

They first need to know why the core business did not make money they can not just go back to operating the service levels they did before and expect to make money just because of no engineering business. The wensleydale option might be more the way to go as it would drop there fixed cost and operating costs even if the income does reduce.

 

And I still have my Job Description on this very headed paper.

 

I think the engineering business started out as useful extra income for the railway. From what has been reported over the last few years, some personnel changes led to problems and could possibly be seen as the start of a downward spiral for the business. Its possible that the rural location of Llangollen made it difficult to recruit the experienced staff required for the engineering side of things.

 

I'm not sure that the railway would benefit by keeping all 3 locos. I would think that 7754 is probably the only one of the three that would be suited to working the full length of the line to Corwen, and even then does it have the water and coal capacity to do a fully loaded trip?

 

The line is 10 miles long. Pretty sure a 57xx Pannier can do a 6 coach trip over 20 miles, bearing in mind the majority of the final 10 miles is downhill. 57xx's have done 7 coach trains on the WSR.

 

My impression is that it was considered to be good and it is only in recent times that there seems to have been a decline in quality and the subsequent problems.

Two things strike me - poor oversight by management of the problems. ie people are complaining about quality of work then you need to get a hold of it fast, this is the whole point of having senior managers. Related to this, why did the quality of work decline - was it high turnover of staff (if you are losing skilled staff then the question for management should be why?) or was too much work being taken on leading to quality suffering which again points to poor management of workflows.

 

This is as good a lesson as you can get why its so important to keep good control of your business, clearly, something went very wrong, and it brought down the plc, its only by sheer luck that it did not bring about the entire railway, Imagine the situation if say, the company owned everything, loco's stock, everything down to the last rail chair, and that at least something possibly may be saved, even if its going to mean a much slimmed down railway as it has to rebuild up,
why wasn't the engineering concern a separate stand alone company that traded on its own?
Was the board and management at fault, and blinded by past successes? was this in their eyes the golden goose that would bring them, and the railway, untold riches, was their hope that the PLC, because of this money, be able to purchase from the trust engines and further stock, so they not the trust were the senior partners, it's a possibility , and might explain why no one appeared to be able to say stop in time.

 

A now deceased friend quit volunteering at Llangollen some years ago in frustration at blatant ticket cash threat by others there, he couldn't interest anyone, eventually another volunteer was convicted of sample offences.

 

This is going to get technical;

The plc is most likely in 'administrative receivership', something that the bank can insist upon because the banking/financing contract is pre-2003.
It is insolvency, not administration. That's why the plc as a whole is currently for sale.
The receivers job is to raise funds to repay the 'preferential creditors', in this case the bank (& employees).
They are not there to pay, or make arrangements with, other creditors.*

If it was administration, then it would have been the directors that called them in, to help them explore options available to save the business. That would be things like trying to sell the engineering side of the business, or selling the engineering assets, in order to free up capital to reduce debts & keep the core business operating.


*so any claims against the engineering side, existing or future, will not be dealt with by the receivers. The claimants will need to lodge their own claims, & await the outcome of the receivership to see if there is any likelihood of recovering anything.
If I was a claimant, I would assume on getting £nil.