Interserve agrees rescue deal to slash £650m debt pile
Existing shareholders will be wiped out as control of the outsourcing firm is handed to lenders
Control of the company will be handed to lenders such as RBS, HSBC and BNP Paribas, and existing shareholders will be wiped out.
The step will see the group’s net debt reduced to £275m and will reduce fears that Interserve was on course to become the next major crisis in the outsourcing sector after Carillion collapsed in January last year, causing thousands of job losses, throwing suppliers into turmoil and costing taxpayers £148m.
Interserve is the UK’s biggest supplier of probation and rehabilitation services, and also holds thousands of cleaning, catering and security contracts.
Interserve’s chief executive, Debbie White, said the agreement with lenders was “a significant step forward in our plans to strengthen the balance sheet”.
“The board believes that this agreement will secure a strong future for Interserve,” she added.
“This proposal has been achieved following a long period of intensive negotiation and has the support of our financial stakeholders and government. Its successful implementation is critical to the Interserve group's future and all of its stakeholders.”
Coltrane Master Fund, one of Interserve’s investors, is unhappy with the plan and has called for a number of directors to be removed.
Rachel Reeves MP, chair of the business, energy and industrial strategy committee, said on Wednesday that it was clear that few lessons have been learned by businesses, investors or government a year after Carillion’s failure, which “was a tale of corporate greed and mismanagement”.
“The outsourcing model we rely on for many public services has been left in desperate need of repair,” she said.
“Interserve and Capita have been teetering on the brink of failure, requiring bailouts from shareholders to stay afloat. Rather than simply transferring the risk around, these businesses and government need to act to fix this broken model of outsourcing and ensure public services are no longer left in the hands of failing businesses.”