West Somerset Railway General Discussion

Not a hope in hell, such is the mutual distrust, between the various factions that something very serious would need to happen before any rescue bid, something like EGM'S On both trustee boards to remove sitting trustees, then an agreement to merge into one organisation, who could then, talk to the administrator to transfer the assets of the old PLC, and the light railway order, to the new charity.

 

Are LROs transferable?

The administrator can't just transfer assets from one entity to another.

 

Any administrator, they are intelligent businessmen, will see that a railway that is able to operate trains under a LRO is in a much better position to pay its creditors. Administrators don't particularly want to see companies go under- they just want to see the debts settled.
Whether the WSR will actually be in a position to run trains is possibly another matter

 

Recent legal changes make it far more difficult to arrange a pre-pack if it involves the directors of the insolvent company. If a pre-pack is organised the decision makers are the creditors of the insolvent company. By and large pre-packs offer unsecured creditors more pence in the pound than insolvent liquidation. The one group that would be side lined in such an arrangement is the shareholders including the support charities. Their interests would be wiped out by such a deal.
My view is that the fundamental question is whether there is a viable business model, either for a line of the current length or a truncated one. That has to be addressed regardless of who owns and controls the railway . Given the huge fixed costs of maintaining infrastructure it's almost certain that the railway can never generate operating surpluses sufficient to cover those costs. That leaves it dependent on grants, donations bequests and other forms of fundraising. That's why I find the attitude that I don't approve of the PLC management so I won't visit/donate so perplexing. It may serve only to increase the risk of insolvency from which it would seem there would be little chance of salvaging much.

 

What they actually tried to sell, iirc was the business of the plc not the plc itself. The PLC would thrn u expect have been liquidated. I think that might cause problems with the LRO but I'm no expert on LROs

 

I would imagine in such an scenario, the present board of the PLC would have resigned en-mass, prior to receivership, or administration, so the receivers would i assume appoint an manager to run the railway, as a going concern, whilst they try to sell it, might that then open the door to a supporters group taking on the running of the railway, As keeping the railway operating stands the better chance to pay back any debts.

 

How did that have any effect on what happened at Llan? I thought the PLC is being wound up, and therefore all the PLC shareholders wound up with air-filled pockets?

The big difference at Llan, as @simon noted, was that the Llan Trust owned a lot of things.

Noel

 

Thanks for that explanation, and also thanks to @35B for his. I am not sure that the shareholders would particularly mind being wiped out. No-one was expecting to see their money again (Chris Dowrick's remark about "buying wallpaper"), and if such a move endured the survival of the WSR as a railway, I would have thought they would be pleased.
I think the attitude that "I don't approve of the PLC management so I won't visit/donate" is explained by the expression "throwing good money after bad", as something not to be recommended, but a practice much associated with railways in the past (They threatened its life with a railway share...).

 

Actually, I think the acquirer would have to pay fair market value for any assets they acquire, to maximize the payback to the creditors?

Which points out that the real question would be 'could the WSRA find enough money to do anything useful'?

Noel

 

There's a huge assumption there. What can trigger insolvency is the auditors not being satisfied that a company is a "going concern" i.e likely to be able to pay its debts as they fall due over throughout the ensuing 12 months. If not the directors duties change at that point. They must run the company for the benefit of its creditors and the same applies to an adminstrator. If it's not a going concern its unlikely that an administrator and the creditors will see continuation of the railway as an attractive alternative to sale of its assets.
The challenge for any prospective successor would be twofold. Would they be able in the very short term to provide creditors with a better deal than from disposal of the assets and, if they can surmount that hurdle, do they have the funds required to fill the gap between likely operating surpluses and the capital investment necessary to sustain the business?

 

Anyone wanting either the existing LRO (Via transfer order) or a new TWO will have to ensure they own either the freehold or the leasehold of the line. This is an extra hurdle that didn’t exist in the recent Llangollen scenario.

deep pockets required for sure...

 

I suspect if you are assuming there will be some rapid denouement, you may be disappointed.

A former regular poster on here was quite keen to point out that cashflow was far more important than profit or loss, and in an asset-rich business like a heritage railway they were surely correct. The plc are suggesting an ongoing need of £1m per year or so, but I think that is predicated on a significant programme of infrastructure renewal. That renewal is undoubtedly needed in the long term, but just suppose they don't get it this year? Well, you don't do that programme of track renewal and the like you planned, but trains can still run. There's a bit more of a depreciation loss on your assets, but the real question is can you pay your immediate bills - staff costs, coal, oil, shop stock and so on. If you can meet those immediate bills from your income, you are still in business.

Long term you have to bite the bullet and get your infrastructure, rolling stock and so on to be at least in no worse condition on each December 31st than they were on the previous Jan 1st. That means capital investment in renewals, hence the £1m p.a. requirement. But if you fail to meet it, you renew a bit less but for the time being you keep running trains. It is not sustainable for a business that sees a future measured in decades, but equally a failure to meet that funding requirement will not necessarily precipitate an immediate collapse. The critical point is when you run out of locos or carriages, or the track is so degraded that you are forced to close sections of the line, or the TSRs are so widespread that you cannot run a functioning timetable. I don't believe the WSR is at that point yet (once the Minehead crossing reopens) and probably only the board can estimate how far away from it they are.

(I am, as usual, starting from the premise that the current plc board do genuinely wish to see the railway survive in something close to its current form; and therefore, whether successfully or not, are running the company on that basis).

It would be an interesting question to see how many heritage railways could say, hand on heart, that their infrastructure was in better condition now than it was, say, 10 or 20 years ago. Some could, but by no means all I suspect.

Tom

 

Very much agree Tom although the problem you don't mention that is starting to bite after many years of use in preservation is bridges both over and under. These are safety critical and very expensive with limited option to defer. The other is the dreaded landslip with some railways finding hard or impossible to obtain in insurance against it.
To guard against such threats to continued operation railways should ideally have substantial cash reserves. These should probably be between three months average turnover and a full year's turnover.

 

Why the hell do you refuse to see that certain people in the PLC are a very significant part of the problem. If those people were to step down, in the interest of the WSR's future, there would likely be a massive change in the support shown.

 

To be fair I think it probably requires more than just removing the current problem individuals now, it feels like it needs a really inspirational replacement to try and reheat the barely glowing embers.

 

It probably does, now. I'm just getting sick and tired of the sycophantic waffling and being told to 'hold my nose and cough up'
Mr Line is Clear was brought in, I thought, to be an unbiased wise head to help steer the WSR out of trouble. Right now he seems to be in JJP's thrall such that there can be no progress

 

It seems to me that there is a much wider problem about the culture within the WSR and the behaviours that are considered normal. This predates the current board.