Interserve reaches deal with creditors to stop it going bust
One of the UK’s largest support services has unveiled a new rescue plan that will prevent the company from going bust but has wiped out shareholders and handed control of the business over to its lenders in the process.
Interserve has agreed a new rescue plan with its creditors that will see its debts slashed from more than £600 million to £275 million by issuing new shares to its lenders.
The debt-for-equity rescue deal will prevent the company from folding and protect around 45,000 British jobs at the expense of stripping control from its shareholders and placing the business in the hands of its lenders.
‘Agreeing the key commercial terms of the deleveraging plan with our lenders, bonding providers and Pension Trustee is a significant step forward in our plans to strengthen the balance sheet,’ Interserve CEO Debbie White said. ‘Its successful implementation is critical to the Interserve Group's future and all of its stakeholders.’
Interserve hand control over to lenders
The debt-for-equity rescue deal will handover £480 million worth of shares to its lenders, which includes Royal Bank of Scotland, HSBC and BNP Paribas.
However, shareholders have yet to approve the motion which would wipe away a significant amount of their investment but considering the scale of the problem it is a hard pill that they will likely have to swallow.
Existing lenders will provide an additional £75 million of new liquidity through the provision of a new debt facility with a maturity of 2022 as part of the deal.
Interserve’s share price tumbles after tough year
This new rescue deal is the second the company has needed in 11 months, with Interserve requiring a refinancing of its debt back in March last year.
The company has had to contend with cancellations and delays in its construction contracts, which have limited its ability to pay down debts and helped its stock enter freefall, tumbling from £1 a share a little over a year ago to around 14p a share.
Following the announcement of its rescue plan, Interserve’s share price rallied more than 10% on Wednesday.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
See an opportunity to trade?
Go long or short on more than 17,000 markets with IG.
Trade CFDs on our award-winning platform, with low spreads on indices, shares, commodities and more.
Live prices on most popular markets
- Forex
- Shares
- Indices
Prices above are subject to our website terms and agreements. Prices are indicative only
