Interserve seeks to win over investors with new rescue deal

Interserve, the troubled government contractor, has updated its proposed rescue package as it looks to win over investors and stave-off a Carillion-style collapse.

The debt-laden group had originally proposed handing over 97.5% of its equity to lenders, including RBS and HSBC, leaving shareholders with just 2.5% of the business. It is looking to raise around £435.2m through a placing and open offer.

But its biggest shareholder, New York hedge fund Coltrane Asset Management, was unhappy with the deal and demanded changes. In particular, it wanted shareholders to retain 10% of the equity, and for the entire board – except for chief executive Debbie White – to step down.

While Interserve has not met Coltrane’s demands, it is now proposing handing over 95% of the business to lenders, doubling the amount left with shareholders to 5%..

Lenders have also agreed to provide an additional £110m through a new debt facility, maturing in 2022, and to write off £1 of debt for every £9 converted into equity.

White said: “Implementation of the deleveraging plan is in the best interests of all our stakeholders. The plan provides new liquidity and creates a strong balance sheet, which outside our Fit-For-Growth programme, will provide us with a competitive financial structure to continue to improve the business and deliver on our long-term strategy.”

Interserve, which employs 25,000 people in the UK and is one of the country’s biggest providers of public sector services, has racked up debts of £631m. Its shares have tumbled, giving it a current market share of around £26m, as investors fear it could meet the same fate as fellow contractor Carillion, which collapsed in January 2018. Interserve is expected to file for administration if shareholders do not back a rescue deal at a meeting on 15 March.

Details of the updated package were published alongside Interserve’s 2018 results, which saw revenues fall 10.7% to £2.9bn, although losses before tax narrowed to £111.3m from 2017’s £244.4m. White said the business had “traded robustly in some difficult markets and continued to win significant new contracts”.

She continued: “Interserve remains focused on positioning the group for long-term sustainable success. This means continuing the operational progress we are making to put legacy issues behind us. However, the group remains over-leveraged and the successful implementation of the deleveraging plan is critical to our future.”

Coltrane has yet to comment on the updated plan. As at 1130 GMT, shares in Interserve were off 14% at 17.7p.