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Karl Barkley, chairman of the Kingston Flyer Southern F Locomotive Trust, said he had approached Kingston Acquisitions Ltd liquidators Prudential Mortgage Ltd - owned by father and son George and Hayden Jones - about potentially leasing the two locomotives, rolling stock and 14km of track.
Mr Barkley, of Invercargill, said the trust's offers to lease or buy the train had had a negative response from Prudential, which could not be contacted by the Otago Daily Times yesterday.
"We are concerned there are plans by some to sell this iconic Kiwi railway off to an American company called Railmark," Mr Barkley said in a statement issued to politicians and media yesterday.
"It's part of our history - it would be like selling off the Earnslaw."
Railmark New Zealand Ltd is listed on the Companies Office website with two directors: one American, one a New Zealander.
"Is this so it doesn't attract overseas investment status, therefore staying under the radar?" he said, questioning the motives for setting up the company in New Zealand.
Railmark had been eyed as a potential buyer for the railway before it was placed in receivership.
The train trust would have many potential avenues of funding if the Kingston Flyer was sold, Mr Barkley said.
"This historic railway has been run over the last 30 or so years by private ownership, who can never get the required funds to preserve this unique, world-class heritage tourist attraction.
"It now is in a very poor state of disrepair and hasn't operated now for its second season."
Once the train was up to main-line standard, the trust planned to run it between Invercargill and Bluff. Other plans included excursions to Dunedin for the Rugby World Cup, to Christchurch for the New Zealand Cup and the flower show, and to the Hokitika Wildfoods Festival.
"As Invercargill will be hosting the Rugby World Cup, and with one of the locomotives based in Invercargill, this is another way to generate income for The Kingston Flyer Railway - at the same time promoting tourism in the deep South."
Mr Barkley said he had raised $55,000 in cash and pledges and was appealing for another 25,000 donations of $100 each to buy the railway.