Network Rail Ltd., which owns and operates most of the U.K.’s tracks, will start borrowing directly from the government rather than accessing markets under its own name, Britain’s Debt Management Office said.
The U.K. may lend as much as 6.5 billion pounds ($11 billion) to Network Rail in the financial year starting this month to make the company’s funding more efficient, according to a statement from the London-based debt office. That amount was added to its financing plans for the period, the agency said.
“The government has now determined that, in future, value for money for the taxpayer will best be secured by Network Rail borrowing directly from the government, rather than by Network Rail issuing debt in its own name,” the debt office said. The government is discussing a possible loan arrangement “in advance of Network Rail’s formal reclassification to the public sector in September 2014,” the DMO said.
Even with that additional requirement, the U.K.’s planned sales of gilts were cut by 1.2 billion pounds to 127.2 billion pounds for the financial year, the DMO said.
The yield on U.K. 10-year bonds fell two basis points, or 0.02 percentage point, to 2.69 percent at 1:04 p.m. London time.
Network Rail has about 29 billion pounds of bonds outstanding, according to data compiled by Bloomberg.