Interserve has announced that is has agreed a deleveraging plan with lenders, bonding providers and the pension trustee to provide “a strong balance sheet and the platform to deliver on its strategy”.
The plan comes following the company’s poor financial performance, with debts of £500m and a share price of 6 pence reported in December 2018.
It has been designed to reduce the firm’s pro forma net debt down to around £275m by issuing around £480m of “new Interserve equity”.
The plan also states that RMD Kwikform (RMDK) will remain part of Interserve and £350m of existing debt will be allocated to RMDK, “of which £169m will be cash-pay and £181m will be converted into a subordinated non-cash pay debt instrument”.
Additionally, the debt allocated to RMDK will be non-recourse to the rest of Interserve and have maturities extended to 2023.
However, the government has voiced its concern over the plan, according to The Guardian.
Specifically, it has advised against the ‘ring-fencing’ of RMDK, but has denied that it is blocking the plan explicitly or threatening to end government contracts with the firm.
The Pensions Regulator spokesperson commented: “We note the announcements from Interserve and we remain in contact with the trustee, their advisers and the employer to ensure the best possible outcome for pension scheme members. We will not be commenting further.”
The trade union, Unite, were also approached for comment but were unwilling to provide it at this time.
Some fear that Interserve could witness a repeat of the Carillion collapse, potentially leaving many of Interserve’s 45,000 UK employees out of pocket.
Energy and Industrial Strategy Committee chair of the business, Rachel Reeves MP said: “Interserve and Capita have been teetering on the brink of failure, requiring bailouts from shareholders to stay afloat.
“Rather than simply transferring the risk around, these businesses and government need to act to fix this broken model of outsourcing and ensure public services are no longer left in the hands of failing businesses.”
Interserve’s deleveraging plan details that the bonding providers would provide additional bonding facilities, issue equity to existing leaders which is subject to claw back in full by existing shareholders and all proceeds from the equity issue would be used to repay Interserve senior debt.
Interserve expects to launch the finalised deleveraging plan in the next few weeks and will be subject to approval from its shareholders.
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