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West Somerset Railway General Discussion

Discussion in 'Heritage Railways & Centres in the UK' started by gwr4090, Nov 15, 2007.

  1. Greenway

    Greenway Part of the furniture

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    Where - or from whom - would the line get three million? The word 'immediate' seems important. If the line has been unable to meet a target of half a million, then three million seems a very tall order for sure.
     
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  2. Bayard

    Bayard Part of the furniture

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    How it would probably work is like this. The SCC own a piece of land, worth millions on the open market with possible permission for commercial development at Minehead and Williton and residential development at other station sites. However , it can't sell the land for commercial/residential development because it has leased it to the WSR Plc. Therefore anyone who bought the freehold on the open market wouldn't be able to do anything to the land except continue that lease to the WSR Plc, for which they pay very little rent. This means that its value to anyone else is very low, until the lease expires in 70? years time meaning that its open market value, for which the SCC is bound to sell it as a public body, is also very low as people don't want to wait that long. However, if the Plc buys the land, the lease vanishes and the Plc can offer it as an asset for borrowing money against at its full open market value, for, although SCC are extremely unlikely to allow any form of development on the land whilst the railway is operating, if it goes bust and is wound up, then the banks can reclaim their money from the asset pledged as security as there would no longer be a railway to hinder development.
    The "hocking it all to the bank" route has the obvious attraction to the Plc over trying to raise money from donors that you don't have to be nice to anyone, you can run the railway how you like, because the bank don't care, so long as they get their interest and the principal back eventually, you can dispense with those irritating independent charities, there being no shares and thus no shareholders any more, and with luck, you can move to a fully commercial model and get rid of those pesky volunteers, so many of whom seem to have their own ideas how things ought to be done.
     
    Last edited: Oct 3, 2020
  3. Greenway

    Greenway Part of the furniture

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    Well, Bayard, that will rattle a few cages, without doubt. ;)
     
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  4. The Dainton Banker

    The Dainton Banker Well-Known Member

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    In effect : yes. But the flip-side is that the bank would be able to increase the amount lent to the company/charity provided that the other usual lending criteria (cash-flow and profitability, etc) are met. Of course, there is no guarantee that the bank would want to or be able to, depending on the lending climate at the time.
     
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  5. jnc

    jnc Well-Known Member

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    Two possibilities come to mind. i) To have a charity own it, so that it is protected for the future, no matter what happens to any non-charity operating entities. (Ironically, such a scheme was what set off an early battle in the Wars of the Roses Quantocks. Speaking of the latter, it's certainly ironic; a crowd of people who all care very deeply about the line, so deeply they engage in internecine warfare over it - even though they all have the same basic goal. There's probably an interesting historical analogy somewhere, but it's not coming immediately to mind.) ii) To utilize its value, either to use it as security for a loan (the proceeds of which are to go towards ???), or to extract some value, by selling off some bits (perhaps Washford).
    Right, but it's a political body, which means it could change its mind at any moment (analogies abound). At this point, there's not much reason to - as @Bayard said, with the lease to the PLC, the hands of whoever owns it are kind of tied.

    Noel
     
  6. Big Al

    Big Al Nat Pres stalwart Staff Member Moderator

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    At last we have something concrete to read. And as it seems to be a complete set of minutes then we have to assume that it represents an accurate summary of views and what was agreed. It also reads as though there is general agreement that 'something' must be done with the WSR structures and that is also good.

    It was disappointing that the group recorded the WSSRT matter as an 'unwarranted intrusion'. Whilst you can understand that those directly involved would not appreciate an external intervention forcing the pace, it's hardly surprising that something like this was going to happen given everything that has gone before. And the fact that it was a democratic action, albeit an unwelcome one, seems to have been glossed over.

    No doubt the WSSRT will continue to fight the intervention but as long as 'due process' is allowed to take place in an unfettered manner then what will be, will be.

    Perhaps at last the WSR and its almost byzantine structures may be dragged kicking and screaming into the 21st Century and a measure of peace may come to the Railway. I hope so.
     
  7. Mike S

    Mike S Member

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    Finance finance and more finance, short term gain, long term pain, could very much bite in the rear....
     
  8. Keith Sims

    Keith Sims Member

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    I should have said.....Should remain with an independent freeholder, SCC
     
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  9. Jamessquared

    Jamessquared Nat Pres stalwart

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    We appear to be back in "white knight" territory gain, one of the WSR's default modes. (i.e., somewhere out there, there is a white knight who will save the railway). This time, the white knight is apparently the banks, if only they could be prevailed upon to loan the railway £3m, for which the freehold is needed as security.

    How on earth does that help? The interest simply represents money not thereby available for the primary purpose, i.e. preserving the railway. Interest on £3m is a lot of money to find every year ...

    There are only two ways to save the railway. It can generate a bigger surplus through its commercial activities (fares and non-fare income) to pay for the necessary renewals. Or it can enthuse its supporters to donate the necessary money, year after year. Other railways manage. A loan is just a means to ensure that when the inevitable implosion comes, there will be even less left by time all the creditors are paid off.

    Tom
     
  10. martin1656

    martin1656 Resident of Nat Pres Friend

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    I remain very concerned that the future is yet more borrowing, it always has to be paid back, what when the day comes, and you can't pay it back,, what then, the railways that have grown, have done it on the backs of their support, and people willing to donate, and the vast majority, are not busy fighting each other, But are pulling in one direction .
    As I see it, the railway has to accept some harsh truths, evolve, or die, the present structures have to go, wholesale, they create problems, not answers, as do some of the personalities, the board of the PLC, are not helping, their stance is building on the toxicity, not removing it, I will say it again, the only answer is that there has to be revolution, to clear the decks, then evolution, to ensure a better future, a combined charity, where everyone has a stake in the railway, a plc that is mindful of what their job is, its to make the railway a success, to work together, as equals with the charity, only then, can the railway turn a corner financially speaking.
     
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  11. johnofwessex

    johnofwessex Part of the furniture

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    Can I add to what Tom has written.

    We have a railway that is in serious financial difficulty (we think) in addition to this we have the economic disruption from Coronavirus and of course Brexit.

    The plan it seems to be is to 'save' the WSR by amongst other things buying the freehold, presumably with borrowed money.

    Borrowing means that the railway HAS to generate enough income each month for however long to repay the loan.

    Looking at a calculation tool, to borrow £3 million at 3% over 25 years means monthly repayments of just over£14000, or £168000pa. Thats coming out of an annual income that currently isnt enough to maintain the railway, and given all the economic uncertainties is by no means guaranteed in the future.

    I might be a bear with a very small brain but please can someone explain.
     
  12. martin1656

    martin1656 Resident of Nat Pres Friend

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    Basically, the idea is to borrow money, to buy the freehold, which the railway, can then use as collateral, because it would have a value, to borrow against, to run the railway, and some how, its expected the railway can earn enough to pay both loans, and keep the business above water, there are a lot of big out going payments that would need to be met, the only people who win, are the loan companies i.e. banks, who could get some very valuable former railway sites ripe for re developing.
     
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  13. ghost

    ghost Part of the furniture

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    What would this loan be secured against though? I assume we would be talking about a substantial amount of money here, so a bank is not going to lend it without security. AIUI the WSR plc assets are already all secured against other loans so they couldn't be used. The cupboard is bare.

    Keith
     
  14. Bayard

    Bayard Part of the furniture

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    It would be secured against the freehold title on the land, which the Plc, as the leaseholder, but no-one else, can buy very cheaply, compared to its open-market value. thus they can borrow the money to buy the asset against which the money is secured, as one does with a mortgage.
     
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  15. Bayard

    Bayard Part of the furniture

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    I think that is considered a bit of an old-fashioned attitude these days, when everyone borrows as much as they can. Ironically, considering John Bailey's comments about the "rough and tumble of the City", the restructuring is being pursued very much along more normal commercial lines suited to running a small business like, say, a bus company, with customers (in the form of passengers) being looked to as the vast majority source of income and commercial lenders being looked to as the primary source of finance.
     
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  16. jma1009

    jma1009 Well-Known Member

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    Surely if the value of the freehold is worth more to the 'WSR' than to SCC, then SCC will take this into account over deciding any sale value? We are talking here about commercial property.

    To my way of thinking it's akin to access rights for development land - to a strip of land for an access road - which of itself might have only a small value - but to the developer is vital.
     
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  17. Bayard

    Bayard Part of the furniture

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    AIUI, a public body, just has to be seen not to be showing a special preference to a particular buyer, i.e. not to sell to A something they could have sold for more to B, whereas a private vendor will hold out for the maximum in any circumstances, but you could well be right. In any case, the "marriage value" is still likely to be less than the full commercial value.
    SCC certainly didn't take that attitude when they sold the lease to the WSR in the first place. IIRC, it was sold for the minimum price they could get away with under the rules and, even then, was partly paid for by worthless shares.
     
  18. johnofwessex

    johnofwessex Part of the furniture

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    I was led to believe that one of the reasons for SCC NOT selling the lease is that were it to sell the freehold it would be left with a number of the liabilities such as sea defence at Blue Anchor and various highway issues
     
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  19. 60044

    60044 Member

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    The takeaway message for me from this is that John Bailey is unashamedly biased in favour of the "new charity" concept, ignoring the fact that such a new charity will be dominated by the PLC and the existing charities effectively marginalised. That can only be an outcome with the potential for more strife. If the WSR is to survive it has to be dominated by the body with the greatest fundraising capacity and the most sensible approach to that (because they already have proven ability) would be to combine the WSST and WSRA. It seems to me that the "hostile 15"'s first step to promote that is utterly pragmatic in getting the process started by consolidating their shareholdings to an (effectively) dominant position and they have been fully transparent about that. I really do think John should keep his views on that to himself - he is a lawyer after all and to find two lawyers agreeing on anything seems to be a rarity, that's how they make a living, after all! It follows that there is bound to be a completely contrary view, and it would appear that at least one of the 15 is a lawyer who holds it!
     
  20. Greenway

    Greenway Part of the furniture

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    Also I have the idea that consultation with other WSR groups, via the PDG, would take place before any agreed sale.
     

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