March 15, 2019
By Iain Withers
LONDON (Reuters) – Troubled outsourcing company Interserve, one of the British government’s biggest contractors, is set to go into administration later on Friday after its shareholders rejected a rescue plan.
Interserve’s shareholders voted 59 percent against a debt-for-equity rescue package at a general meeting in central London on Friday, in a victory for its biggest shareholder, US hedge fund Coltrane, which owns a 28 percent stake and had opposed the plan.
The company is now expected to file to go into a ‘pre-pack’ administration on Friday evening, under a plan overseen by EY which would see Interserve’s creditors buy its assets.
Interserve, which provides services to the public sector ranging from school dinners to hospital cleaning, said this arrangement should ensure that its business can continue to operate “as normal” for the time being.
Shares in the company have been suspended.
Interserve chairman Glyn Barker told investors ahead of the vote on Friday the firm was struggling with a “financial burden that is completely unsustainable and is crippling”.
Barker had warned against rejecting the rescue plan and forcing the firm into administration, arguing it would be “more disruptive to the company, significantly more costly and would deprive shareholders of any value whatsoever”.
An Interserve spokesman told Reuters the company’s lenders had already set up a company with a shadow board ready to buy Interserve’s assets.
Interserve employs 68,000 people worldwide, with around 45,000 of them in Britain. It ran into difficulty after a string of ill-advised acquisitions and loss-making contracts weighed on its finances and piled on debt, raising fears it could collapse into insolvency like rival outsourcer Carillion.
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 learned 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.”
The rejected rescue plan would have handed Interserve’s lenders, which include banks and hedge funds, 95 percent ownership of the company in exchange for cancelling 485 million pounds ($641.95 million) of its debts, with existing investors’ holdings diluted to 5 percent.
A representative for Coltrane at the general meeting declined to comment on the situation, other than saying “I voted for Donald Trump” when asked how the firm had voted.
The pre-pack administration will wipe out all shareholder value.
(Reporting by Iain Withers; Editing by Lawrence White and Rachel Armstrong)