Railtrack shareholders dump A&O for Lovells

The Railtrack Share-holders Action Group has dropped Allen & Overy for Lovells.

The group left A&O because it saw a potential conflict between itself and the Railtrack bondholders that are long-term A&O clients. A&O admits it was willing to continue acting for the action group.
“It was us who first spotted there could be a problem with the bondholders,” said Simon Haslam, action group co-ordinator and chief investment officer of major Railtrack investor Fidelity. “We decided to instruct different counsel because we saw a potential conflict within A&O as they act for some of Railtrack's bondholders.”
Andrew Clark, who led the A&O team, confirmed this was the case. “Ultimately it was the action group that decided to move. We could have carried on acting for them in the scope of trying to gain compensation from the Government for their shares, but their needs expanded,” he said.
Railtrack went into administration earlier this month. A&O was originally instructed by the action group a week after the Secretary of State for Transport Local Government and the Regions, Stephen Byers, stated in the Commons that shareholders would receive no government compensation. But a source close to the case said the action group is likely to take issue with Railtrack's bondholders, who will probably receive some pay-out from the Government.
“We got involved with the action group a week after the Byers announcement. Their original claim was against the Government and this is what we advised them on,” said Clark.
The action group moved to Lovells independently, and not on a recommendation from A&O, said Haslam. But Clark hinted that the action group did not have much choice as to who it turned to.
“Lovells was one of the only top firms left not already acting on the Railtrack administration in some capacity, although Lovells is an excellent firm,” Clark said. Clifford Chance is understood to have long-term clients with financial interests in the defunct rail operator; Slaughter and May is acting for the Railtrack administrator, Ernst & Young; CMS Cameron McKenna is advising Stephen Byers and the Government, and also working on the Channel Tunnel Rail Link; Ashurst Morris Crisp is acting for the directors of Railtrack; and Theodore Goddard has won work for the trustee for Railtrack's bondholders.
Graham Huntley, a partner in the litigation practice, is leading the Lovells team.