{"id":5298,"date":"2018-12-10T17:26:18","date_gmt":"2018-12-10T17:26:18","guid":{"rendered":"http:\/\/www.styledeals.co.uk\/blog\/interserve-rescue-plan-prompts-share-collapse\/"},"modified":"2018-12-10T17:26:18","modified_gmt":"2018-12-10T17:26:18","slug":"interserve-rescue-plan-prompts-share-collapse","status":"publish","type":"post","link":"https:\/\/www.styledeals.co.uk\/blog\/interserve-rescue-plan-prompts-share-collapse\/","title":{"rendered":"Interserve rescue plan prompts share collapse"},"content":{"rendered":"\n
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\n Interserve holds the contract for cleaning Network Rail stations
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Shares in Interserve – one of the UK’s largest providers of public services – have collapsed after it revealed it is seeking a rescue deal.<\/p>\n

The firm, which works in prisons, schools, hospitals and on the roads, has \u00a3500m of debts and says its rescue plan will involve issuing new shares.<\/p>\n

Its shares initially fell as low as 6.5p, down 70% from Friday, but closed at 11.5p, representing a 53% fall.<\/p>\n

A year ago, Interserve’s shares had been worth 100p each.<\/p>\n

On Sunday, the firm said it was “making good progress” on a recovery plan. <\/a><\/p>\n

However, it added that current investors could see the value of their stake in the company slashed, in what it called a “material dilution for current Interserve shareholders”.<\/p>\n

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Details of the plan, which it said it expected to announce early next year, are yet to be finalised.<\/p>\n

The government has said it supports the company’s long-term recovery plan.<\/p>\n

On Monday, Interserve was awarded a new \u00a325m Welsh public sector contract to help in the redevelopment of Prince Charles Hospital in Merthyr. Work is set to start this month. <\/p>\n

Workers at the Foreign Office and the NHS are among Interserve’s tens of thousands of UK employees.<\/p>\n

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Lenders resigned to write-offs<\/h2>\n

Simon Jack, business editor<\/strong><\/p>\n

Sources close to Interserve’s creditors have told the BBC they accept they may have to write off some of their loans to ensure the company’s survival. <\/p>\n

Lenders described talks around the company’s future as “extremely fluid”. <\/p>\n

They recognised inevitable comparisons to the situation that engulfed Carillion, but insist the company’s management still has lenders’ support. <\/p>\n

The BBC also understands Interserve is expected to announce imminently it has secured new public service contracts. <\/p>\n

The Labour party leadership – ideologically opposed to the role of private companies in the provision of public services – has insisted that no new government contracts should be awarded to the company while it is in a parlous financial position. <\/p>\n

That position is widely considered within industry to be detrimental to the future of a company that employs 75,000 worldwide, 45.000 in the UK. <\/p>\n

Read more from Simon here<\/a><\/p>\n

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Interserve said it was in talks about a “deleveraging plan”, which it said would deliver “a strong balance sheet”.<\/p>\n

“Although the form of the deleveraging plan remains to be finalised, it is likely to involve the conversion of a substantial proportion of the group’s external borrowings into new equity, an element of which may be sold to existing shareholders and potentially other investors,” the firm said. <\/p>\n

It would be second rescue deal for Interserve, with the company refinancing its debt in March.<\/p>\n

Its troubles have been blamed on cancellations and delays in its construction contracts as well as struggling waste-to-energy projects in Derby and Glasgow.<\/p>\n

Interserve claims its prospects are improving, and says it will increase profits this year. <\/p>\n

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What does Interserve do?<\/h2>\n

From its origins in dredging and construction, the company has diversified into wide range of services, such as health care and catering, for clients in government and industry.<\/p>\n

At King George Hospital in east London, for instance, Interserve has a \u00a335m contract for cleaning, security, meals, waste management and maintenance.<\/p>\n

Its infrastructure projects include improving the M5 Junction 6 near Worcester, refurbishing the Rotherham Interchange bus station in Yorkshire, and upgrading sewers and water pipes for Northumbrian Water.<\/p>\n

But Interserve is also the largest provider of probation services in England and Wales, supervising about 40,000 “medium-low risk offenders” for the Ministry of Justice.<\/p>\n

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In a statement, Interserve said: “The fundamentals of the business are strong and the board is focused on ensuring Interserve has the right financial structure to support its future success.”<\/p>\n

The company said its options included bringing “new capital into the business and progressing the disposal of non-core businesses “.<\/p>\n

Interserve’s difficulties follow the collapse of Carillion in January 2018, which put thousands of jobs at risk and cost taxpayers \u00a3148m<\/a>.<\/p>\n