Egypt's Citadel Capital has a conditional go-ahead to acquire all of South African company Sheltam Close's 35 percent stake in an east African railway concession, a director said on Monday.

Citadel has already acquired a 17.5 per cent stake in Rift Valley Railways (RVR), which won a 25-year concession to run the Kenyan and Ugandan railways jointly, after buying a 49 per cent stake in Sheltam, the operator's lead investor.

The two have now agreed on Citadel taking 51 per cent of Sheltam to give it Sheltam's full 35 per cent stake in RVR, once the deal has the greenlight from lenders to RVR including the International Finance Corporation (IFC), said Karim Sadek, a managing director at Citadel Capital.

'It is done, we are not going to renegotiate, (it is) signed, sealed, finished. The only reason we are not there yet is that we are waiting for that consent,' he said.

Another shareholder in RVR, TransCentury, has complained about the deal and says it will seek legal redress. The other partners in the consortium are Mirambo Holdings and Primefuels, Centum Investment and Babcock & Brown of Australia.

'We are always looking for an additional stake, even now. If any of the shareholders want to drop out we are more than happy to cover them.'

The shareholders in RVR completed a $10 million cash call at the end of January, Sadek said. A second $10 million will be raised by the end of March.

The money raised in January will mostly go towards paying overdue concession fees but the second tranche of cash will partly be used to invest in track renovation work and new engines, Sadek said.

The $20 million is part of the $50 million the company needs to raise in a restructuring process to get trains moving.

Kenya demanded last year that the concession deal be renegotiated to change the shareholding and leadership structure in order to inject fresh capital into the line's operations.

Sadek said most of the shareholders had agreed on a new structure whereby RVR is the lead investor in a yet-to-be-formed Kenya Uganda Railway Holdings that will own the concession.

Once the restructuring deal is signed the shareholders will be required to raise $50 million within 15 months. They would have $20 million of it by the end March, Sadek said.

According to Citadel Capital's estimates, the line needs only $150 million of investment to have an efficient and reliable service.

'They don't have to go spending loads on marketing, they do not need to cut prices because there is so much cargo in Mombasa that even operating on (modern) standards will not be able to carry,' he said. 'We are not talking about billions.'

Some $54 million is already available in a facility that has not been drawn on. IFC and Germany's state banking group KfW made the loan available at the start of the concession but required some $50 million of equity from RVR.

Sadek said his company hopes that by the first quarter of next year the service between Mombasa and Nairobi will be fully recovered and that by end of 2011 the entire route to Kampala will be back in full operation.-Reuters