Rail infrastructure operator Network Rail (NR) said it is launching a new RPI index-linked bond issue programme to raise 10bn stg in the capital markets during the next two years, for investment in the railways.
NR said the bonds would be directly and unconditionally guaranteed by a financial indemnity from the UK government and would be issued under its debt issuance programme.
The not-for-profit group said it plans to increase the proportion of index-linked issuance in its overall debt mix.
It added that it had put together a group of eight market makers, all of whom were also index-linked gilt-edged market makers and would be trading the bonds off their gilts desks. They include Barclays Capital, Citigroup Inc, Dresdner Kleinwort, HSBC Holdings, Merrill Lynch & Co, Royal Bank of Canada, Royal Bank of Scotland and UBS AG.
NR funding director Fred Maroudas said: "This programme follows an extensive consultation exercise with investors, who have indicated substantial interest in a new programme of benchmark size index-linked issues which carry a government guarantee.
"We expect to raise a total of 10bn stg in the capital markets over the next two years to finance new investment in the railway and to refinance our short-term debt. Much of this could be index-linked if investor demand remains strong.
"Index-linked debt is a prudent, cost-effective way of financing long-term public utilities like the railway.
"It provides value for money to the taxpayer and farepayer whilst giving investors such as pension funds the inflation-linked assets they need to match their future liabilities."
