Interserve confirms new rescue deal plans

10 December 2018 | By Neil Gerrard

Interserve has entered a new round of talks with its creditors over a rescue plan for the business, as it considers handing investors greater control in exchange for cancelling some of its debt.

The contractor confirmed this morning that it was working with its advisers on what it termed a “deleveraging plan”.

It said the form of the plan still needed to be finalised but was “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 discussions also involve amending its current financing agreements, including the maturity dates and repayment profiles of its existing debt facilities.

Last month, the company revealed that its year-end net debt could be as high as £650m, which it put down to continued cash outflows related to its troubled energy from waste contracts.

Now it is focusing on reducing that debt, targeting leverage of around 1.5x net debt/EBITDA.

If such a plan were implemented, it could result in “material dilution for current Interserve shareholders” it said. By 9am this morning, Interserve’s shares had lost more than 50% of their value on the news, dropping to 11p.

In a statement, Debbie White, CEO of Interserve, said: "We are making good progress on our deleveraging plan which we expect to announce early in 2019. Our lenders are supportive of the deleveraging plan which will underpin the long-term future of Interserve. Our refinancing in April of this year contemplated the development of a deleveraging plan in consultation with our stakeholders and the liquidity injected at that point also gave us the funding to execute our business plan. Our discussions with our lenders are a positive step in the process that was agreed as part of the April refinancing. The Cabinet Office has also expressed full support for the work we are doing to implement our long-term recovery plan.

“The fundamentals of our business remain strong. The deleveraging plan will give Interserve a strong long-term capital structure and provide a solid foundation on which to build the future success of the group."

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