Interserve to file for administration as rescue rejected

Interserve

Almost 60% of shareholders voted against the rescue deal

65,000 jobs and multiple major public contracts were at risk around the world after outsourcing giant Interserve (IRV.L) teetered on the brink of nearly certain collapse on Friday.

While shareholders will be wiped out, with ownership falling to the lenders, the nature of a pre-pack administration means the company, which employs 45,000 people in the United Kingdom, can continue trading.

It sells services, including probation, cleaning and healthcare, and is involved in construction projects. It won contracts worth over £130m from governments and councils across the United Kingdom in 2018 alone.

Government contractor Interserve is to go into administration after its largest shareholder, the United States hedge fund Coltrane, led a rebellion against financial restructuring plans drawn up by the company's lenders.

Interserve's board of directors is now holding an urgent board meeting to consider its options. However, the company added that "in the absence of any viable alternative" it is likely to formally apply to go into administration.

Shares in the company were suspended on the London Stock Exchange. The company is now worth £17m.

The GMB union said Interserve's problems, which come after the failure of Carillion previous year, showed it was "time to turn the tide on the disastrous experiment" of outsourcing public services. It ran into difficulty after a string of ill-advised acquisitions and loss-making contracts weighed on its finances and piled on debt, raising fears it could collapse into insolvency like rival outsourcer Carillion. "This should be the final nail in the coffin for Chris Grayling's failed probation privatisation".

But its failure is likely to prompt further debate over the use of private sector contracts for public services. "It is time to bring these contracts back in-house".

Kevin Brandstatter, GMB national officer, said: "Ministers have learnt absolutely nothing from the Carillion fiasco and are hell-bent on outsourcing public-sector contracts".

Interserve's shareholders voted 59 percent against a debt-for-equity rescue package at a general meeting in central London on Friday, in a victory for its biggest shareholder, U.S. hedge fund Coltrane, which owns a 28 percent stake and had opposed the plan.

"Shambolic mismanagement is putting jobs put on the line and services in jeopardy".

However, New York hedge fund Coltrane, Interserve's largest shareholder with more than 27%, dismissed the plan, which was eventually rejected by over 59% of shareholders. Coltrane is understood to have voted against the rescue package.

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