Tranz Rail sells Auckland passenger business

WELLINGTON, New Zealand (CNN) -- New Zealand's dominant rail operator Tranz Rail said Monday it has sold its rail corridor in the country's largest city, Auckland, to the government for about $37 million (NZ$81 million).

Auckland Regional Council will now have responsibility for the city's passenger rail services, while Tranz Rail will keep the freight business.

Tranz Rail and the New Zealand government began negotiations over the corridor in September.

Tranz Rail, which is refocusing its business onto its long-distance freight operations in New Zealand, will continue to run passenger services in Auckland under contract until at least June 2003.

"Auckland now has the corridors it requires for a rapid transit system, while freight services to Northland are preserved. We are satisfied a fair and equitable price has been negotiated," the New Zealand government said.

First payment of $31 million

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In a joint statement to the New Zealand Stock Exchange Monday, Finance Minister Michael Cullen and Transport Minister Mark Gosche said the first $31 million (NZ$75 million) would be paid immediately to Tranz Rail.

Tranz Rail managing director Michael Beard said the Auckland sale was "another step" in the company's strategy of selling off non-core operations to concentrate on the freight business. The next step would be to sell off the Wellington Tranz Metro operation.

He said proceeds from the Auckland sale would be used to pay down Tranz Rail's bank debt.

Trading in Tranz Rail Holdings shares were halted Monday morning ahead of the deal announcement. They last traded Friday at NZ$3.95.