NETWORK RAIL is embarking on its first entry into capital markets and is days away from raising £4 billion of short-term financing, the group said yesterday.

The rail infrastructure company, which replaced the loss-making Railtrack, has agreed a £4 billion commercial paper programme, which will be added to the £9 billion of bridging finance used to refinance it last year.

The money is expected to last the company until April 2004, when it is expected to receive funds from Tom Winsor, the Rail Regulator, who is conducting an interim review of Network Rail.

The funds will be used to meet working capital requirements until the implementation of the interim review.

The refinancing is expected to be the first significant test of the market’s appetite for rail investment since the government-supported Network Rail took charge of the UK’s railway tracks and stations.

The fundraising comes after a turbulent few weeks in the industry, where train operating companies have suffered in the wake of the implementation of new strategies. Connex yesterday become the first train operator to have its franchise terminated, while FirstGroup was prevented from bidding for a franchise which it already operates successfully.

A spokesman for Network Rail said yesterday that the infrastructure company’s decision to go to the market had been flagged up last year and that recent developments in the industry would have no impact on the company’s ability to raise finance.

Richard Bowker, head of the Strategic Rail Authority (SRA), also expressed confidence that investors would still view rail as a good long-term investment.

Network Rail said it would start issuing notes next month in various currencies in the euro and US markets.

Merrill Lynch is arranging the programme. The dealers are Barclays Capital, Citibank, HSBC, Merrill Lynch, RBC, Royal Bank of Scotland, UBS and WestLB.

The commercial paper programme is supported by a £4billion standby loan facility provided by the SRA and a £1billion standby commercial bank liquidity facility.

Network Rail CP Finance, a special purpose company set up to enable the financing exercise, has been assigned the highest short-term ratings available from the credit rating agencies.

Fred Maroudas, head of funding of Network Rail, said: “We are very pleased that Network Rail has put this programme in place. It represents Network Rail’s first entry into the capital markets and is an important part of our financing plans.”

Ron Henderson, finance director of Network Rail, said: “This commercial paper programme provides Network Rail with additional financing to meet working capital requirements through to the implementation of the interim review in April 2004.”

In a separate development, Network Rail told staff yesterday that about 2,000 jobs would have to be cut at the company over the next three years. It is understood that the cuts are most likely to hit administrative functions within the rail group and would leave signalmen largely unscathed.

The Rail, Maritime and Transport Union said the job cuts would be spread across the company, which employs more than 14,000 workers.