Interserve goes back to shareholders with improved debt-for-equity offer

Troubled UK outsourcing company Interserve has agreed new terms for a debt-for-equity swap with its lenders as it tries to appease shareholders and avoid collapsing under its £631m debt mountain.

The original plan would have cut existing investors’ holding to 2.5%, but it was rejected by New York hedge fund Coltrane and Dutch hedge fund Farringdon Capital Management, who together hold approximately one-third of Interserve’s shares.

Coltrane had also called for the entire Interserve board to be removed apart from chief executive Debbie White.

The revised deal doubles shareholders’ remaining stake to 5%, with 95% going to the firm’s lenders, RBS, BNP Paribas, HSBC and hedge funds Emerald Investment and Davidson Kempner. It also involves a 10% write off of the company’s debts, and gives the company a £110m credit line until 2022.

Also today, Interserve announced its full year results for 2018, more than halving losses to £111m compared with £244m last year. Underlying profit rose 9.7% to £93m for the year. Shares fell 8.2% to 19p in early morning trading.

In line with an earlier warning, net debt rose to £631.2m, up from £502.6m the year before.

Of the new rescue package, 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 group, which holds contracts to run a range of services in prisons, schools and hospitals, will also issue £435m of equity.

Shareholders are due to vote on the new plan at a general meeting on 15 March, brought forward from the 26th of the month.

The deal will need to receive a majority of votes to pass. If the firm fails to push through its restructuring, it has lined up accountant EY to act as administrator, raising the prospect of up to 25,000 job losses in the UK.

Image: Interserve chief executive Debbie White (Interserve)

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