Written by: Keith Tully
Published: 6th February 2019
The support services and construction giant Interserve has agreed a rescue deal with its creditors that is intended to stave off its potential collapse into administration.
Recent months have seen the company facing a challenge to remain in business with its debts becoming increasingly burdensome as its market value deteriorated.
As a major government contractor and a business with more than 45,000 employees in the UK alone, there have been fears that Interserve might soon follow its one-time rival Carillion into a position of insolvency.
But the company’s bosses have struck a deal with creditors that should see its debts reduced from around £600 million to nearer £275 million.
This process, described by Interserve as its “deleveraging plan”, will require the company to issue £480 million worth of new equity shares.
“Agreeing the key commercial terms of the Deleveraging Plan with our lenders, bonding providers and Pension Trustee is a significant step forward in our plans to strengthen the balance sheet,” said Debbie White, Interserve CEO, in a statement.
“The board believes that this agreement will secure a strong future for Interserve. This proposal has been achieved following a long period of intensive negotiation and has the support of our financial stakeholders and government.”
The plan put forward by the Interserve board still needs to secure the support of its shareholders before it can be taken forward.
However, board members have said that they are “also actively preparing alternative plans to ensure the proposed transaction can be implemented in the event that shareholder approval is not forthcoming”.
Carillion’s collapse in early 2018 resulted in one of the largest liquidation processes ever seen in British industry and thousands of people lost their jobs as a consequence of it.
The failure of what was a major provider of services within the public sector resulted in significant logistical problems for government, as well a spike in corporate insolvency rates among construction companies nationwide.
In recent months, the government announced that it now intends to oblige large scale public sector contractors like Interserve to create ‘living wills’ so that there is a greater degree of transparency about the details of their finances and their operational procedures in the event of their collapse.