Government contractor Interserve to go into administration a year after the collapse of Carillion after shareholders reject rescue plan
- Interserve is set to fall into the hands of its lenders in a pre-pack adminstration
- Investors voted against a proposed rescue deal at a meeting today
- Its shares have been frozen but the firm insists its ‘business as normal’
Interserve is set to fall into administration and into the hands of its lenders after it failed to secure investor backing for a controversial rescue plan.
It comes just over a year after industry counterpart Carillon went bust, causing numerous project shutdowns and thousands of job losses.
Interserve, which employs 45,000 people and holds crucial Government contracts for a range of services in prisons, schools and hospitals, will be immediately sold to its lenders after the administration in a process known as a pre-pack.
This means the firm will avoid a Carillion-style of collapse.
Shares in Interserve have been frozen as administrators at EY handle the process
The business will continue to operate ‘as normal for customers and suppliers’, it said, but shares will be suspended from trading on the London Stock Exchange immediately.
The pre-pack will be managed by accountancy giant EY and is expected to be completed on Friday evening.
Interserve investors include RBS, HSBC and BNP Paribas – together with Emerald Asset Management and Davidson Kempner Capital.
Interserve said: ‘The board of directors of the company is convening an urgent board meeting to consider its options.
‘In the absence of any viable alternative, it expects to implement an alternative deleveraging transaction, which is likely to involve the company making an application for administration and, if the order is granted, the immediate sale of the company’s business and assets (i.e. the entire group) to a newly-incorporated company, to be owned by the existing lenders.’
At a meeting on Friday, 59 per cent of Interserve’s shareholders voted against a proposed debt-for-equity swap, aimed at slashing the firm’s near-£650 million debt mountain.
It would have resulted in existing investors seeing their holding slashed to just 5 per cent. But New York hedge fund Coltrane, the largest shareholder with more than 27 per cent, dismissed the plan.
Another outsourcing firm, Carillion, went bust in January 2018 leaving thousands out of work
Interserve has been hampered by high debts, construction delays and a failed foray into the energy-from-waste market.
The collapse has sparked anger from the unions.
Kevin Brandstatter, GMB national officer, said: ‘Ministers have learnt absolutely nothing from the Carillion fiasco and are hell-bent on outsourcing public-sector contracts.
‘Shambolic mismanagement is putting jobs on the line and services in jeopardy. Our public services can’t go on like this.’
Meanwhile, Unite has demanded an immediate meeting with the firm’s administrators. It said: ‘By being forced into administration the entire workforce is facing an uncertain future. Workers will be expected to continue working normally unless specifically told otherwise.’