Interserve shareholders jittery as firm homes in on debt-for-equity rescue deal

Alex Daniel
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Interserve's shareholders have fled in recent months for fear it will suffer the same fate as Carillion (Source: Getty)

Shareholders of debt-laden outsourcer Interserve were anxious this morning following reports it will announce the details of a long-awaited rescue deal this week.

Interserve’s stock fell three per cent this morning after last night’s story that chief executive Debbie White was gearing up to finally reveal the refinancing terms with the firm’s lenders.

Read more: Struggling outsourcer Interserve approaching finalised rescue refinancing deal with lenders

White’s announcement of debt-for-equity rescue talks late last year raised eyebrows among its suppliers, many of whom have privately raised concerns they will not receive payments from the struggling outsourcer.‚Äč

But the announcement, which Sky News reported may come this week, would allay their concerns, along with those of the firm’s 45,000 UK employees, that Interserve will go the same way as failed contractor Carillion, which collapsed in January last year.

David Madden, analyst at CMC Markets, said the debt-for-equity swap was “good news and bad news” for investors.

“The good news is the risk of the company going bust is greatly reduced [if a deal is announced].”

“But the deal means the firm will have to increase the number of shares in the company and give them to the lenders. That increase weighs on the price of the shares, so they counteract each other.”

Government sources have insisted they have no doubts about the company’s long-term ability to deliver large public sector contracts, but the firm’s value has plummeted 85 per cent in recent months to around 12p.

Workers at the NHS and the Foreign Office are among Interserve’s 45,000 UK employees, and most of its annual £3.2bn turnover comes from the government.

Interserve is, however, making headway in offloading a series projects which had a substantial hand in building up its debt pile. Last week it finally finished one of four plants which turn waste materials into energy, hailed as “an important milestone” for the firm.

And one city source told City A.M. the company was closing in on handing over the second such plant, with an announcement to follow in the coming weeks.

Read more: Late payments: Public sector outsourcers fail to pay cash-strapped suppliers for six wee

For the firm’s chiefs, the completion of the energy from waste (EfW) plant in Dunbar, on the south east coast of Scotland, marks a forward step in washing their hands of a set of projects which have plagued the contractor since 2016 and cost it more than £220m.

The company employs around 75,000 staff globally and provides construction, waste management and cleaning services for both private and public clients.