Interserve to enter administration
Support services and construction group Interserve, which employs around 2,000 in the West Midlands, has failed to secure investor backing for a rescue plan and is set to fall into administration, with lenders seizing control of the outsourcer.
The group has a worldwide workforce of around 75,000 including 45,000 in the UK.
It has its new regional office near Birmingham Airport, where staff from its former office at West Bromwich have relocated, and employs 600 in cleaning and maintenance at Russells Hall Hospital, Dudley.
It also owns specialist construction firm RMD Kwikform in Aldridge, which employs 120.
Investors in Interserve – which holds crucial Government contracts for a range of services in prisons, schools and hospitals – voted against its proposal at a meeting on Friday.
Interserve said: "The board of directors of the company is convening an urgent board meeting to consider its options.
"In the absence of any viable alternative, it expects to implement an alternative deleveraging transaction, which is likely to involve the company making an application for administration and, if the order is granted, the immediate sale of the company's business and assets (i.e. the entire group) to a newly-incorporated company, to be owned by the existing lenders."
The firm added that the administration and sale to its lenders was expected to be completed last night and the business will continue to operate "as normal for customers and suppliers".
Shares were suspended from trading on the London Stock Exchange with immediate effect yesterday.
Interserve has lined up EY to carry out a pre-pack administration, after which the firm will fall into the hands of its creditors.
Lenders such as RBS, HSBC and BNP Paribas – together with Emerald Asset Management and Davidson Kempner Capital – are expected to seize control once the process is complete.
The pre-pack process will allow it to avoid a Carillion-style collapse, to the relief of Government.
Under the rejected plan, aimed at slashing a near-£650 million debt mountain, the group had been proposing a debt-for-equity swap with its lenders that would have resulted in existing investors seeing their holding slashed to just five per cent.
However, New York hedge fund Coltrane, Interserve's largest shareholder with more than 27 per cent, dismissed the plan, which was eventually rejected by 59.4 per cent of shareholders.
It had required the support of more than 50 per cent of shareholders to gain approval.
Interserve has been hampered by high debts, construction delays and a failed foray into the energy-from-waste market.
Jon Trickett, Labour’s Shadow Minister for the Cabinet Office, said: “The Tories have once again failed the British people and our public services. The Government has clearly learned nothing from Carillon's collapse just over a year ago.
“This latest disaster, which could have been avoided, shows that the Government is not prepared to change their dogmatic attachment to outsourcing, and it is costing the country dearly.
“It is crucial that Interserve’s administrators do not simply strip the profits in favour of shareholders and leave the taxpayer to pick up the bill for the rest. The public purse should not be burdened with these failures."
Richard Beresford, chief executive of the National Federation of Builders, said: “This decision on Interserve’s future shows why we need to reform the procurement process from its foundations to ensure that more regional contractors can compete and win work, the damaging trend to work within wafer thin profit margins does not continue, and spread risk across fiscally responsible businesses who reinvest profits and are not bound by shareholders.”
As with Carillion’s collapse, the NFB said it would be doing all it could to support members who are part of Interserve’s supply chain, as well as the many workers and apprentices affected by the decision.