OUTGOING FirstGroup chairman Martin Gilbert admitted mistakes had been made during the bus and rail group's foray into the North American market but declared the Aberdeen-based company was in "fantastic shape" after 96.5% of investors backed a £615 million cash call.

After a meeting lasting just 20 minutes, a three-for-two share issue designed to relieve the weight of the company's debt was passed. Just 3.5% of shareholders who cast a ballot opposed the move.

Including those who withheld their vote, 7.8% of investors failed to back the arrangement.

Mr Gilbert, who has been chairman of FirstGroup for 27 years, said afterwards: "I think the shareholders accepted the rationale for the rights issue as being in the best interests of the company."

The board "spent months" considering its options, he said, before settling on the fully underwritten cash call, which will generate a net £585m for the company to pay down its borrowings and invest in its operations.

FirstGroup, which has sold a number of bus operations south of the Border, had considered further sales to pay down debt but decided this would be counter-productive at what it considers to be a time of poor valuations for transport assets.

FirstGroup is weighed down with £2 billion of borrowings, having acquired American group Laidlaw, owner of Greyhound coaches, for £1.7bn in 2007.

It was part-funded with a £200m share issue but the bulk of the financing came from debt.

Mr Gilbert said: "I think with the benefit of hindsight the Laidlaw acquisition was not funded correctly and this is putting that right now. We did not raise enough equity at the time."

Mr Gilbert, who is the founder and chief executive of funds house Aberdeen Asset Management, has chaired FirstGroup since it emerged from council-owned Grampian Regional Transport.

He announced his intention to retire from the board when FirstGroup announced its rights issue plans last month.

He said: "I was going to go a year ago and agreed to stay on to get the balance sheet in the right state." He added: "This sets the company on the right path."

A meeting room booked by FirstGroup in London's Holborn Bars, the gothic Victorian building that once served as Prudential's headquarters, was packed with 80 investors and company advisers.

The mood was one of quiet acceptance of the company's proposal to issue 722.8 million shares at 85p each, which is designed to ensure it retains its investment grade credit status.

Mr Gilbert and chief executive Tim O'Toole were quizzed by private investors over whether the company was seeking enough funds to repair its balance sheet and whether it was seeking further business sales.

On asset sales, Mr O'Toole said: "We looked very seriously at that."

The former London Underground chief added: "It doesn't solve the debt issue because you are giving up quality earnings so your gearing on the turnaround gets worse and worse."

Problems at FirstGroup, which runs ScotRail and bus services in Aberdeen, Glasgow and the Lothians, came to a head after it was awarded, and then stripped of the West Coast Main Line rail franchise, after the Government discovered flaws in the bid procedures.

Mr O'Toole told the meeting that he still believes FirstGroup's bid was the "lower risk option" compared to incumbent Sir Richard Branson's Virgin Rail, which was given a contract extension.

One investor wanted to know how much the dividend was likely to be when it restarts next year. It would be around 4p per share, he was told.

FirstGroup shares closed down 0.9p, or 0.73%, at 122.8p.