The largest shareholder in the ailing government contractor Interserve has submitted a revised financial rescue plan and told directors it is their duty to stop advocating rival proposals put forward by the company’s lenders.
Interserve, which employs 45,000 people in the UK, is at the centre of a standoff between creditors and shareholders over its future, a year after the collapse of fellow outsourcer Carillion.
The company, which has hundreds of public sector contracts including the probation service, hospital cleaning and school meals, is at risk of buckling under its £632m debt pile unless a financial rescue can be agreed.
Coltrane, a US hedge fund, has spurned proposals drawn up by Interserve’s lenders, including hedge funds and major UK banks such as RBS and HSBC, which would cancel £485m of debt in exchange for control of the company.
Shareholders including Coltrane have threatened to vote down the “terrible” plan that would leave them with just 5% of the company and the right to buy new shares to a maximum of 33.3%. A vote is scheduled to take place on 15 March.
On Monday, Coltrane published a counter-proposal that it said would leave the company with less debt, with Interserve issuing £110m of new shares in a rights issue that Coltrane would guarantee.
Interserve has a vast number of public sector contracts in the UK in areas such as school meals, hospital cleaning and probation services. It has also worked on road projects on the M5, maintains some of Britain’s busiest railway stations, and cleans more than 2,000 London Underground carriages every evening.
Interserve in numbers
45,000 Number of UK employees
700 The number of schools where it provides catering services
40,000 The number of medium- to low-risk offenders on probation that Interserve supervises
150 The number of BBC sites, including Salford Media City, where Interserve provides total facilities management
£227m The value of a five year contract for providing office management, catering and waste disposal at 700 DWP sites across the UK
A63 The new footbridge crossing the road at Princes Quay in Hull, used by 45,000 people a day, is one of many construction projects Interserve is running across the UK
£25m Interserve’s part of a contract to redevelop the Prince Charles Hospital in Merthyr
600,000 The number of visitors to Edinburgh Zoo, where Interserve does the cleaning, security, park presentation, waste disposal and washroom services.
£250m The sum paid by Interserve to buy Initial Facilities from Rentokil Initial in 2014, adding more than 25,000 new employees to the group.
51 The number of years that Interserve will hold the concession to build and run two new colleges at Durham University
The plan would give 55% of the company to creditors and shareholders would end up with 37.5%. Coltrane would also agree to bridge any short-term funding gap with £66m of new debt, removing any “trigger” allowing the lenders to put the company into insolvency instead.
Creditors had lined up accountancy firm EY to manage its administration in the event that there was no consensus on a rescue.
Coltrane said Interserve’s directors, whom it has threatened to sue if the company collapses into administration, should no longer recommend the lenders’ proposals. “Given that a better proposal for a greater number of stakeholders is now on the table, the directors, in their capacity as fiduciaries to the company, should halt cooperation with lenders on implementation of their plan,” it said.
“If the company is not able to make such a decision then this raises serious questions about the board’s decisions leading to this point, and about the position of the lenders, including major UK banks.”
Coltrane said its proposal was “intended to be delivered on a consensual basis, and is the only plan that can be”. It pointed out that the plan had been delivered without any funding from Interserve, which said it was likely to spend £90m on advisers working on the proposal it drew up with lenders.
The Guardian has approached Interserve for comment.
