APPENDIX 1
The following is a timeline of events leading
to Metronet entering administration.
1. On 29 June 2007 Metronet Rail BCV Limited
("MRBCV") filed for an Extraordinary Review with the
PPP Arbiter, claiming additional costs for which it sought reimbursement
of £992 million. As part of that filing, MRBCV asked for
an Interim Adjustment to the Infrastructure Service Charge of
£400 million, which was later increased to £551 million.
MRBCV requested the interim relief because its lenders had suspended
further funding, its shareholders had declined to contribute further
resources and its cash reserves and future payments from LU were
insufficient to meet its obligations, according to its projections.
2. On 16 July, the PPP arbiter issued a
draft determination on MRBCV's request for interim relief that
provisionally awarded £121 million, payable beginning January
2008 and subject to various conditions regarding solvency of MRBCV.
The interim increase in the Infrastructure Service Charge and
the conditions for and timing of its payment in the draft determination
left MRBCV with insufficient resources to discharge its contractual
obligations.
3. The Metronet Infracos are subject to
a special insolvency regime known as PPP administration introduced
by sections 220 to 224 of the Greater London Authority Act
1999 ("GLA Act"). This special regime allows the Mayor
to apply for a PPP administration order. Under a PPP administration
order, the court directs one or more named insolvency practitioners
(each known as a PPP administrator) to manage the affairs, business
and property of the Metronet Infracos for the achievement of the
purposes of the PPP administration order as set out in the GLA
Act 1999 and in a manner which protects the respective interests
of the members and creditors of the Metronet Infracos. The purposes
of a PPP administration order are:
— the transfer to another company or
(as respects different parts of its undertaking) two or more companies,
as a going concern, of so much of the company's undertaking as
it is necessary to transfer in order to ensure that the activities
may be properly carried on; and
— the carrying on of those relevant
activities pending the making of the transfer.
4. Letters were received by LU from the
Directors of both Metronet Infracos on 17 July 2007 confirming
that, as a result of the PPP Arbiter's draft directions in respect
of MRBCV's claim for an interim adjustment to the Infrastructure
Service Charge and following discussions between the companies,
their lenders and shareholders, both Metronet Infracos had concluded
that they were or were likely to become unable to pay their debts.
On that basis both Metronet Infracos invited the Mayor to petition
for the appointment of a PPP Administrator to both Metronet Infracos.
5. A Mayoral Approval Form ("MAF")
was signed by the Mayor on 17 July 2007. The MAF recorded the
Mayor's directions concerning the presentation of a petition and
the provision of a loan facility and indemnity to the PPP administrators.
Following the Mayor's direction, petitions for PPP administration
of the Metronet Infracos were submitted by TfL to the High Court
at 8:00 am Wednesday 18 July 2007. Orders were granted by Mr Justice
Lightman appointing three partners and one director from Ernst
& Young LLP as the PPP administrators.
October 2007
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