Troubled contractor Interserve has agreed a rescue deal with lenders to slash borrowings of more than £600M.
The firm, which employs 75,000 people worldwide as well as 45,000 in the UK, is hoping the debt for equity deal will help it avoid a Carillion-style collapse by reducing its net debt to around £275M. It will do so by issuing £480M of new shares to its creditors making them majority shareholders in the company.
Under the deal, £350M of Interserve debt will be allocated to subsidiary company and temporary work specialist RMD Kwikform.
Despite lenders’ willingness to transfer their loans to RMD, the company will remain part of Interserve as the Cabinet Office was reportedly concerned that a transfer would leave the rest of the company too weak to win government contracts.
After the debt for equity swap, existing Interserve shareholders will control 2.5% of its shares and the new equity will amount to a 97.5% stake in the firm.
Existing shareholders are set to be offered new shares on a pro-rata basis according to their existing stake in the firm.
In addition, under the terms of the deal, the lenders will lend Interserve £75M repayable in 2022.
Interserve chief executive Debbie White said: “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. Its successful implementation is critical to Interserve Group’s future and all of its stakeholders.”
Interserve must now secure approval from shareholders for the deal.
The firm also today announced that Coltrane, a New York-based hedge fund with a 15% stake in the firm, wants to replace the board with new directors, except for White.
Shares in Interserve rose 18%, to 15½p in early trading.
Interserve’s share price plummeted by 75% late last year after the company revealed it was seeking to renegotiate its debt.
The company’s share price also fell to its then lowest point in more than 30 years last November after the company received a claim from waste-to-product manufacturer Renewi which said the firm had missed a deadline on a joint venture on an energy-from-waste plant in Derby.
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