National Express confirmed yesterday that it is to launch a rights issue, setting the figure at £360 million, as it was revealed that the search for a new chief executive is to be stepped up.

The bus and rail operator, which has been the subject of two failed bid approaches in recent months, had been expected to launch the fundraising this week to avoid breaching banking covenants. As well as giving the company a breathing space, it will substantially reduce its £1.1 billion debt position.

However, its relationship with its largest shareholder — the Cosmen family from Spain — remains under scrutiny after Jorge Cosmen, a board member, voted against the rights issue. The family has a near-19 per cent stake in the business that would be diluted to below 6 per cent if it did not participate in the fundraising, costing Mr Cosmen his seat on the board.

The Cosmen family publicly criticised the board of National Express last month when it pulled out of merger talks with Stagecoach and decided instead to pursue the fundraising. The Cosmens oppose the rights issue on the basis that the company does not have a well-defined strategy.

Other shareholders, including M&G, which has a 12.5 per cent stake, have supported the company’s plan to raise funds.

The Cosmens have two weeks to decide whether to take part in the capital-raising. It would cost them about £70 million to maintain their stake at its existing level. “The rights issue is going to reach its destination. The only question is whether the Cosmens will be on the bus,” an insider said.

The Cosmen family said: “The proposed rights issue falls well outside the parameters of the family’s commitments and the family will therefore need to consider whether, in these circumstances, it can support a rights issue without any broader strategy to deal with the many challenges the company faces.” The family is thought to have backed a previous plan for a rights issue, but at a much lower level.

An extraordinary general meeting is to be held on November 27, at which shareholders will be asked to approve the fundraising. John Devaney, the executive chairman, said: “The extraordinary general meeting requires a 50 per cent vote. We do not know which way the Cosmens will vote, but we are confident we will get the 50 per cent.”

National Express will offer seven shares for every three held by investors at a heavily discounted price of 105p. This constitutes a 40 per cent discount to the theoretical ex-rights issue price, according to analysts, and a near-70 per cent discount to the closing share price on Tuesday.

The company, which put its search for a chief executive on hold during the recent bid talks, has kicked off the process again, with Russell Reynolds, the corporate recruitment company, charged with finding a new boss.

Gert Zonneveld, an analyst with Panmure Gordon, said that while the fundraising was part of the solution, the company still had several operational issues to address now that its balance sheet was in a stronger position. “There will still be some twists and turns in the road,” he said.

The immediate challenge for the new chief executive will be reopening talks with the Government over its two rail remaining franchises after it hands on control of the East Coast Main Line service tonight.

Most pressing is its East Anglia franchise, as the Government looks likely to decide against extending the franchise to 2014 when the contract ends in 2011.

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