Interserve investors reject rescue plan

Marco Green
March 15, 2019

Interserve is set to fall into administration after shareholders voted against a rescue deal created to relieve it of a more than £630m debt pile.

Around 60% of the votes cast rejected the proposed debt for equity swap, which would have given lenders 95% of the business and left shareholders with just 5%.

The troubled outsourcer, which employs 45,000 people in the United Kingdom to clean schools and hospitals, run probation services and build roads and bridges, had been battling to avoid a collapse like Carillion after it hit trouble about three years ago.

An Interserve spokesman told Reuters the company's lenders had already set up a company with a shadow board ready to buy Interserve's assets.

In a statement following the vote, the board said: "In the absence of any viable alternative, it expects to implement an alternative deleveraging transaction, which is likely to involve the company making an application for administration".

The company is now expected to file to go into a "pre-pack" administration on Friday evening, under a plan overseen by EY which would see Interserve's creditors buy its assets.

The pre-pack process will allow it to avoid a Carillion-style collapse, to the relief of Government.

Interserve has been hampered by high debts, construction delays and a failed foray into the energy-from-waste market.

The GMB union said Interserve's problems, which come after the failure of Carillion past year, showed it was "time to turn the tide on the disastrous experiment" of outsourcing public services.

"Shambolic mismanagement is putting jobs on the line and services in jeopardy".

The Cabinet Office, which awards government contracts to firms like Interserve for the delivery of public services and is the company's largest client, is understood to have been in regular contact with the firm in recent months. But there have so far been no assurances about what this move holds for Interserve's existing unsecured subcontractors and suppliers.

The National Federation of Builders (NFB) said there would be thousands of workers wondering whether they still have a job, and called for changes in the way the government hands out contracts to big national companies. It also operates the probation service.

Its infrastructure projects include improving the M5's Junction 6 near Worcester, refurbishing the Rotherham Interchange bus station in Yorkshire, and upgrading sewers and water pipes for Northumbrian Water. "I've lost about £12,000", he said, adding that the company's management had been "overconfident".

Other reports by Click Lancashire

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