UK fund managers may boycott debt issued by the new Railtrack, the successor to the collapsed UK rail operator, after the UK government refused to compromise on an agreement with bondholders at a confidential meeting last week.

The government wants investors to sign a standstill agreement, being drafted by Citigroup SSSB, in which they would waive some of their usual creditor rights in return for having their interest payments guaranteed until the new Railtrack is established. This is expected to take at least six months. If investors do not sign the agreement this week, their payments will not be guaranteed.