Railtrack has agreed to buy Section 1 and has guaranteed part of LCR's borrowing

2.7  Railtrack will purchase Section 1 of the Link following its construction. The price, net of Government grants received by LCR, is to be based on the actual cost of building Section 1 and will include an interest element to compensate LCR for the cost of funding construction. Interest is calculated at a fixed rate of seven per cent a year up to the agreed target construction cost and LIBOR8 thereafter. It is expected that the purchase price for Section 1, including accrued interest but after the deduction of direct grants, will be some £1,500 million.

2.8  In addition to issuing Government-guaranteed bonds (GGBs), LCR put in place facilities to draw, if needed, up to £700 million of debt from a consortium of commercial banks and other sources. If used, LCR's obligations to service and repay the debt have been guaranteed by Railtrack on the condition that the money can only be used for the design, development and construction of Section 1. Some £500 million of the debt facilities will mature on or before September 2005, while the remainder is expected to be assumed by Railtrack (Figure 12).

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8  London Inter-Bank Offered Rate - the rate of interest offered on loans between first-class banks for a specified period (usually three to six months)