Metronet, the main private contractor on the London Underground, gave warning today that it faced administration after failing in a bid to secure £551 million of emergency funding.

In a stinging verdict, Chris Bolt, the regulator of the private-public partnership formed to modernise the Tube, said that he would grant Metronet £121 million — slightly more than a fifth of its request.

A Metronet spokesman told Times Online that the outcome “did not come very close to the aspirations we had”.

And he acknowledged that administration was one of a number of options that would be considered at an emergency board meeting today.

“We need to talk to our shareholders,” he said.

“Clearly, if there is no funding from them or the banks then administration has to be an option.”

Metronet’s shareholders include WS Atkins, Balfour Beatty, EDF Energy, the trainbuilder Bombardier and Thames Water.

Bombardier reacted by writing off the value of its investment in the group, which it put at $164 million.

The contractor has suffered heavy criticism for cost overruns in its flagship contract to maintain and modernise two thirds of the Tube network, including the Bakerloo, Central and Victoria lines.

Metronet had asked Mr Bolt, the PPP Arbiter, for £400 million in emergency funding as part of a claim for £992 million of extra money.

Mr Bolt revealed today that the contractor had revised the amount of emergency funding required from £400 million to £551 million last week after banks refused to extend its overdraft.

He said he believed that Metronet needed only £121 million to cover work over the next year.

He added that if the contractor had been operating efficiently, it would not yet have used up a £55 million pot of money set aside to cover cost overruns.

Metronet is due to issue a formal response today.

Tim O’Toole, the managing director of London Underground, welcomed the arbiter’s judgment.

He said: “We have consistently made it clear that Metronet has failed to deliver in an efficient and economic manner and that is why it has accumulated such a significant cost overrun during the four years of its contract to date.

“We believe the arbiter’s draft determination supports that view.

“We shall now continue to make our case to the arbiter ahead of his final interim determination due in two weeks’ time.

“I’m determined to make the case that the public should not be forced to pay a penny for Metronet’s inefficiencies.”

A spokesman for Atkins said it would wait for Metronet's response before discussing any potential course of action.

Tempus: Bolt shoots

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts