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Without a merger partner or a rescue rights issue, National Express compounded its woes by today issuing a profit warning.
The trains and coach giant admitted its profits this year will be below the already downwardly revised estimates of analysts in the City.
To blame is the increased interest rates the company is having to pay on its £1 billion debt mountain because it has failed to get its refinancing rights issue away on time, as well as the emergence of problems in the US.
The latter issue, surrounding greater costs than expected in the restructuring of its school Yellow Bus operations in America, is moot as it had been the subject of speculation that the US was a dealbreaker for the £1.7 billion takeover of National Express which fell apart last week.
Until then, National Express had been the subject of a bid approach from its own deputy chairman, Jorge Cosmen, on behalf of his Spanish family which owns 18.5% of the company.
That was made in league with the private equity house CVC and included a side deal which would see rival UK passenger transport operator Stagecoach take over National Express's train operations at Liverpool Street and Fenchurch Street and its West Midlands bus business.
However ,at the 11th hour the Cosmen and CVC pulled out.
That has left National Express falling between two stalls.
It subsequently emerged Stagecoach has made an offer for an all-share merger with National Express.
However, if National Express is to remain independent it needs to get away a rights issue of up to £400 million away pretty quickly. The announcement of a rights issue had been expected today alongside its third-quarter trading statement.
The need to refinance its balance sheet became plain today as National Express was forced to admit that its profits are being hit because of a 1% rise in its interest rates from the start of the October.
At the height of the summer crisis —when the Department for Transport stripped the firm of its Kings Cross train franchise and chief executive Richard Bowker walked out — National Express agreed a waiver with its bankers over breaches of its borrowing covenants. That waiver was an extension with a deadline of 1 October, which meant that if National Express had not significantly brought down its debts by then, its interest rates would start rising.
National Express had already warned of a collapse in profits at the half year when they slumped 40% because of a £46 million loss in earnings at the Kings Cross East Coast Main Line train business, hit hard by the recession.
Analysts, who had already cut their profits forecasts to around £120 million, are expected to shave another £3 million off for the increased interests costs and a further £3 million for rising costs in the US.
The company refused to comment this morning on when its rights issue might be launched.
