There will be a short transition, so any passengers should carry on using Virgin Trains East Coast's customer and ticket booking services.
However, Stagecoach told investors in February that VTEC's four-weekly premium payments had been 30% higher than those made by its state-owned predecessor East Coast (which replaced National Express when its franchise failed), despite "a challenging economic environment, increasing political uncertainty, significantly lower rates of growth across the British rail network over the past two years and sustained poor performance by NR".
The company also has already funded its full GBP165 million loan commitment to the East Coast franchise.
Mr Grayling said: "Stagecoach and Virgin Trains got their bid wrong and they are now paying a price".
Virgin Trains East Coast - a joint venture between Stagecoach and Virgin was awarded the franchise for eight years back in 2014. He reiterated that, as the proposed East Coast Partnership contractual structure evolved, the ECML infrastructure would remain in the hands of the public sector via NR.
Transport Secretary Chris Grayling is due to confirm later this afternoon that he will bring the line back into public ownership following a string of failures.
United Kingdom government will take back control of the running of the rail route between London and Edinburgh from private operator Stagecoach (temporarily) after the company failed to make the contract work financially.
Stagecoach's chief executive Martin Griffiths estimated the company's total losses at £260m, in February.
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Grayling told parliament on Wednesday that the new railway would be a partnership between public and private operators after the Stagecoach contract ends on June 24, five years earlier than planned.
"After three shambolic private sector failures on the East Coast the message should now sink in that these cowboys can not be trusted and should be locked out of the system on a permanent basis".
He said: "Every announcement is a smokescreen to divert attention from the failings of the Transport Secretary's policy".
"It will have representatives of both the train operating team and Network Rail, as well as independent members who will importantly ensure the interests of other operators on the route are taken into account".
He said the aim was to create a new public-private partnership from 2020, with "one simple team operating the railway".
Mr Grayling said he has received "official advice" that Virgin and Stagecoach should be allowed to continue bidding for future rail franchises.
"Come on Chris, East Coast line today, the whole system tomorrow", he tweeted, jokingly.