Interserve has rejected a rescue plan put forward by its biggest shareholder, the US hedge fund Coltrane Asset Management, raising the risk that one of the government’s largest contractors could be pushed into administration.
The hedge fund has unveiled proposals, aimed at countering Interserve’s original plan, that seeks to reduce debt and plug gaps in liquidity to prevent creditors forcing a default. Coltrane fears Interserve’s initiative will wipe out almost all of its shares.
The Interserve plan, which will be subject to a vote on March 15, would mean shareholders, including Coltrane, would retain 5 per cent of the company as part of a debt-for-equity swap with its lenders.
Coltrane, which holds 27 per cent of voting rights, has also threatened legal action, and asked for the removal of the entire Interserve board apart from chief executive Debbie White.
Interserve said on Tuesday that Coltrane’s proposal was unrealistic, given that the hedge fund had not even started to talk to creditors.
It said it was “unable to consent” to Coltrane’s request that the board and lenders consider its alternative plan because of the difficulties in getting lenders to agree “larger write offs” or provide more credit in the “short timeframe available”.
Interserve employs 65,000 people worldwide but earns two-thirds of revenues from the British government. With 45,000 staff in the UK alone, it employs twice the number of employees as Carillion, the outsourcer that collapsed last year.
The business was plunged into difficulties in 2016 after misjudged acquisitions and a disastrous venture into energy from waste plants, which has taken Interserve’s net debt to £738m, dwarfing the £27m equity in the company.
The stalemate between creditors and shareholders raises the chances that Interserve’s proposals will be voted down next week, potentially putting the business into administration.
The company has warned it is facing a multimillion-pound cash shortfall by the end of the month, which could threaten payments to its subcontractors, employees and pensioners and risk the delivery of essential public services.
Interserve is one of the government’s biggest providers of privatised public sector services, cleaning and maintaining Department for Work and Pensions’ jobcentres, the Foreign and Commonwealth Office and Ministry of Defence army bases.
In a statement Interserve, led by chairman Glyn Barker, warned that given its “short-term liquidity requirements”, Coltrane’s proposal risked “the future of Interserve together with its employees, pensioners, customers and suppliers”.
“Interserve’s deleveraging plan is currently the only fully funded proposal which has the agreement of lenders, bonding providers and pension trustees,” it said.
Sources close to Coltrane said Interserve’s response was “disappointing”.
“Of course we will need to speak to lenders, but we need first to understand the company’s views on our proposal — and the board have a duty to consider it, which they are currently failing to fulfil.”
Get alerts on Interserve PLC when a new story is published