1. The latest example of the internal Periodic Bond Report is separately attached to this letter.2 The ratings of the bond issuers as set out in the report are publically available. However the value of the bonds is a commercial matter between the operators and their bond issuer.
2. This report is produced for review every 4 weeks. However the Bloomberg service monitors ratings daily, and informs DfT immediately if there are any changes to the ratings. If any such change caused concern, senior DfT staff would be alerted.
3. The bond report includes both season ticket and performance bonds. In the event of a company ceasing to be a franchisee, the season ticket bond allows the Department to claim an amount equivalent to the amounts paid in advance by passengers for season tickets. This is estimated at a different level for each operator and adjusted annually. The performance bond is intended to cover the Department's costs arising from a company failure, such as re-franchising.
4. It is important to note that the Department may negotiate another solution with the company concerned to cover the costs of DfT and ensure that season ticket revenue is not lost to the railway. This is what happened in the case of GNER. It is therefore not necessary to call on these bonds in all cases where a franchise contract is terminated.
5. The attached report3 analyses the different bonds by provider. It gives the date of the issue of the bond as well as the expiry date, bond value and potential maximum future value of bond. Each bond also has the latest Standard & Poors rating. It should be noted that no bond has a rating below AA-. On the last page of the report is a rating of all bond providers by the main rating providers: Standard and Poors, Fitch and Moodys.
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2 Not printed here.
3 Not printed here.