Interserve sweetens debt deal to stave off collapse

Outsourcing giant Interserve has tweaked the terms of a debt-for-equity swap with its lenders as it looks to appease angry shareholders and avert collapse.

Under the terms of the previous deal – aimed at slashing the Government contractor’s near-£650 million debt mountain – existing investors would have seen their holdings slashed to 2.5%.

But Interserve said on Wednesday that it is now proposing terms that would see that rise to 5%, while the firm will also take on an additional £110 million of new debt.

It comes after New York hedge fund Coltrane reacted angrily to the first proposal and called for the entire Interserve board to be removed, apart from chief executive Debbie White.

The group has yet to respond to the latest plan, with shareholders set to vote on it on March 15.

If it is approved, Interserve’s net debt will be substantially reduced, putting the firm on a securer financial footing.

However, if the firm fails to reach a restructuring agreement, it has lined up EY to act as administrator, raising fears of a Carillion-style collapse for its 25,000 UK workers.

Shares in Interserve were down over 8% at 18.9p in morning trade.

The group, which holds crucial contracts for a range of services in prisons, schools and hospitals, will also issue £435 million of new equity as part of the arrangement.

Interserve’s building materials division, RMD Kwikform, will remain part of the group and £350 million of debt will be secured against the lucrative unit.

If given the green light, lenders such as RBS, HSBC and BNP Paribas – together with Emerald Asset Management and Davidson Kempner Capital – will seize control of the firm.

Ms White said: “The agreement of deleveraging plan terms with our lenders, bonding providers and pension trustee represents a significant milestone for Interserve. Implementation of the deleveraging plan is in the best interest of all our stakeholders.

“The plan provides new liquidity and creates a strong balance sheet, which, alongside 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.”

The restructuring comes at a sensitive time for the outsourcing sector, following the collapse of Carillion in January 2018, which led to thousands of job losses.

Interserve also announced full-year results alongside the debt update.

Last year revenue fell 10.7% to £2.9 billion, but pre-tax losses narrowed from £244.4 million to £111.3 million.