Interserve: Major government contractor which employs 45,000 to go into administration
Outsourcing firm set to be sold to creditors as Cabinet Office insists jobs and public services not at risk
Shareholders in the firm voted 59 per cent against a package that would have slashed its debts but handed control of the company to its lenders.
Interserve is now expected to file to go into a “pre-pack” administration on Friday evening, under a plan overseen accounting firm EY, which would see Interserve’s creditors buy its assets.
“The board of directors of the company is convening an urgent board meeting to consider its options,” an Interserve statement said.
The firm added it expected a transfer of all its assets to a newly-incorporated company owned by its existing lenders was likely to take place on Friday evening.
Interserve said this arrangement should ensure that its business can continue to operate “as normal” for its customers and suppliers.
Shares in the company have been suspended after they plunged 34 per cent on Friday.
Interserve employs 45,000 people in the UK and is one of the government’s biggest contractors, providing services from school meals to hospital cleaning.
However, it ran into difficulty after a string of ill-advised acquisitions and loss-making contracts weighed on its finances and piled on debt.
Fears had been raised the company could collapse into insolvency like rival outsourcer Carillion, another firm which held a large number of government contracts before its liquidation in January last year.
However, the pre-pack administration process will allow it to avoid Carillion’s fate, a development likely to come as a relief to the government.
A spokesperson for the Cabinet Office said: “This announcement will not affect jobs or the provision of public services delivered by Interserve.
“We are in close contact with the company and we are confident a positive way forward will be found.”
The rejected rescue plan, would have handed Interserve’s lenders, which include banks and hedge funds, 95 per cent ownership in exchange for cancelling £485m of its debts.
A pre-pack administration would see all shareholder value wiped out entirely.
The move was opposed by company’s largest shareholder, US hedge fund Coltrane, which has proposed its own rival rescue plan that protects more shareholder value.
Coltrane has also indicated it wants to take part in any bidding for Interserve assets.
The GMB union, which represents Interserve workers, said the company’s turmoil showed outsourcing public sector contracts to private companies had been a “disastrous experiment”.
“Ministers have learnt absolutely nothing from the Carillion fiasco and are hell-bent on outsourcing public sector contracts,” the union said in a statement.
“Shambolic mismanagement is putting jobs on the line and services in jeopardy. Our public services can't go on like this.”
Additional reporting by Reuters