Troubled outsourcing firm Interserve has announced a new rescue plan which will aim to slash debts from £600m to just £275m by issuing new shares to lenders.
Revealing dates of the plan, chief executive Debbie White said it was "a significant step forward in our plans to strengthen the balance sheet" but the deal will still need the backing of shareholders who face the bleak inevitability of no return.
Under the deal, the government contractor hopes to issue £480m worth of new shares which will be swapped with creditors for debt. Interserve will keep its profitable building materials business, RMD Kwikform (RMDK), loading £350m on to its balance sheet.
The firm has faced a multitude of problems over the last 18 months but has particularly struggled to cope with squeezed margins on contracts and massive delays on completing waste-to-energy projects in Derby and Glasgow.
Interserve, which holds contracts for a range of services in prisons, schools and hospitals and a cleaning contract with Network Rail has seen share prices drop dramatically over the last year but today’s announcement did see shares rise by 10%.
Interserve’s defiant CEO believes says the proposal has been achieved following a long period of intensive negotiation and claims the deal has the support of our financial stakeholders and government.
"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,” White said. “Its successful implementation is critical to the Interserve Group's future and all of its stakeholders. The Deleveraging Plan will, alongside our 'Fit for Growth' transformation programme, place us in a strong position to deliver our strategy, be competitive in the marketplace and provide a secure future for the Interserve Group's employees, customers and suppliers."
Today’s deal comes little more than six months after the support services and construction giant said its recovery plan remained on track despite revealing a £6m pre-tax loss for the first six months of 2018.
The company posted the loss from a profit of £24.9m last year with sales down from £1.64bn to £1.48bn for the six months to the end of June, while operating profit fell 30% to £40.1m.
The Fit for Growth programme is seen as key to Interserve’s recovery. In June, the company said it was on target to deliver £15m savings in 2018 with £8m secured in the first half.