Trainload of cash pulls in for Czech Railways

Trainload of cash pulls in for Czech Railways
30. června 2016 • 11:01
It’s been quite some time since Czech Railways [ČD] was last sitting on a comparable pile of cash. The rail operator stays mum over planned use of capital, some observers say it hasn’t got a clue. Through recent bond transactions, the national carrier has accumulated some CZK 2bn, according to E15’s calculations. Another CZK 3bn-plus is headed its way from a planned sale of railway station buildings.

The rail carrier has cashed in on bond issue volume disparities. In May, ČD issued bonds worth EUR 400m, or nearly CZK 11bn. The primary aim of the issue was to raise capital to pay off older bond debts of EUR 300m plus interest, amounting in all to around CZK 9bn.

Initially, ČD only planned an issue of the same volume as the one to be repaid. But it was tempted by favourable prevailing market conditions to borrow considerably more at a lower interest rate, resulting in the surplus of CZK 2bn. And it can add that gain to the CZK 3bn or more that will be generated by the railway station buildings sale to a fellow state entity, the Railway Infrastructure Administration [SŽDC], likely to occur on 1 July.

Some sources claim ČD is at a loss as to what to do with the huge cash pile. “The board of directors has created several alternative strategies for the use of the resources. They are to be discussed with the supervisory board and the management committee. No decision has been taken yet,” responded Radek Joklík, a ČD spokesperson.

Joklík hinted at a plan to cut the company’s total debt. It currently tops CZK 30bn. However, an agreement would be needed with creditors to enable early repayment. Purchasing more rolling stock is another option, while Joklík also touched on the possibility of improving employees’ working conditions.

On the downside, transferring the station buildings will not be a cost-free route. It may mean an immediate cash inflow, but the transaction will also lead to new ČD leasing outlays, mainly when it comes to ticket offices.

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