Contractor Interserve's rescue hits heavy going as soon as it's announced
Faced with a Hobson's choice, a leading shareholder has called for the entire board to be sacked with the exception of CEO Debbie White. This is starting to look like Brexit in miniature
Pain, messy compromises, rotten deals and a bad situation, and no we’re not even talking about Brexit for once. Instead it’s another government cock-up, Interserve, which has been teetering on the brink for what seems like forever.
We’re saved, the contractor announced today, having signed a rescue deal with its banks to cut its £650m debt pile only for a very big shareholder, which is going to have its teeth knocked out a result, to rock up with a demand to sack the board.
But you’re about to ask how its financial woes could be considered a government cock up given that Interserve is a privately owned contractor, which has fallen upon hard time thanks in no small part to the mismanagement of its previous bosses, and a board that was asleep at the wheel.
It’s because ministers keep on throwing vital work at companies like this one, which builds things, renovates things, cleans hospitals, provides school dinners and more besides, only to end up wringing their hands and trying to duck any responsibility for not keeping their eyes on the ball when things go wrong. As they have for Interserve.
A provisional rescue, involving the banks taking control in return for a sharp reduction in its debt and shareholders being all but wiped out in the process, had been announced towards the end of last year.
But since then there’s been rather a lot of to-ing and fro-ing. A particularly vexed issue was the future of RMD Kwikform, Interserve’s construction business that makes good money.
The banks thought they might quite like to keep it for themselves through spinning it off.
The Cabinet Office was reportedly less than keen on this development because it raised concerns about the viability of the business that remained.
You can understand that. No one wants be back at this point, or in an even more one, in a couple of years time.
The upshot? RMD will remain in the family, which is probably good news for the group.
The downside for RMD is that it will end up carrying most of the group’s remaining debt, which amounts to £350m in total. That makes it look a bit like a top flight racehorse entering a long distance handicap steeplechase on heavy ground with the top weight of 11 stone 12 on its back.
Over to the shareholders, who still have to approve this. They face the Hobson’s choice of either getting themselves virtually wiped out by the deal, or completely wiped out through Interserve going pop. It’s Brexit in miniature.
Coltrane, a US hedge fund, is understandably less than impressed with this development and has filed a motion to sack the entire board with the exception of CEO Debbie White. Most seem to view her as just about the only good news this company has had in recent times.
So the tangled web just got even more tangled. If the government thought its worries were over as regards Interserve, it's having to think again.
As for the question “is it really a good idea to do outsourcing in the way we do it when Carillions, Interserves, Capitas and the like keep on falling flat on their faces like this?" It isn’t even being asked, let alone answered.
That can is being kicked down the road. Same old, same old.