Interserve facing crucial vote on rescue plan
|bbc.com 10 Mar 2019 at 17:02|
Interserve, one of the UK s largest providers of public services, is urging shareholders to back a rescue deal or the firm could face administration.
Last month it reached a deal with creditors to prevent its collapse.
But if shareholders reject its debt-for-equity-swap plan in a vote this Friday, Interserve s lenders could apply for a pre-pack administration.
This would mean the firm avoiding a Carillion-style collapse, but would wipe out existing shareholders.
A pre-pack administration enables a company to sell itself, or its assets, before it appoints administrators - who then take over the running of the business to protect creditors.
In a pre-pack, the lenders take 100% of the business.
Interserve s rescue plan involves cutting its debts from more than £600m to £275m by issuing new shares. These will then be swapped with creditors for debt.
However, if shareholders do vote to approve the rescue deal, which would hand 95% of the firm to lenders, it would leave them with with heavily watered-down shareholdings.
Interserve s largest shareholder, Coltrane Asset Management, is critical of the deal and is threatening to block it unless there is a better deal for shareholders.
Interserve sells services, including probation, cleaning and healthcare, and is involved in construction projects.
Under the rescue deal, Interserve will also keep its most profitable division, its RMD Kwikform construction business, loading £350m of debt onto its balance sheet.
The firm had considered spinning the unit off to its lenders to raise money.
If the company collapses on Friday - this is what will happen.
Accountants EY will be appointed administrators, they will then sell the company for a nominal amount to the current lenders (a mixture of banks and bond holders) who will own 100% of the new company.