Interserve talks with banks continue as debt-for-equity swap looms
Lenders include RBS, HSBC and BNP Paribas, together with Emerald Asset Management and Davidson Kempner.
Outsourcing giant Interserve remains locked in crunch talks with its lenders as it thrashes out a radical plan to cut its near-£650 million debt mountain.
The Government contractor – which holds crucial contracts for a range of services in prisons, schools and hospitals – on Friday said that those discussions are “constructive” and lenders are “fully supportive of Interserve’s business plan”.
This includes proposals for a debt-for-equity swap with its lenders, such as RBS, HSBC and BNP Paribas, together with Emerald Asset Management and Davidson Kempner Capital.
Interserve, which has borrowings of more than £600 million, has reached agreement to defer a debt payment due on February 1 2019 until April 30 2019.
It will provide us with a strong balance sheet and enable us to move forward with confidence and the ability to improve our business and deliver our long-term strategy Debbie White, Interserve
Under the programme, Interserve is also considering handing its lucrative building materials division, RMD Kwikform, to the lending group.
In addition, Interserve will issue new equity that will result in “material dilution” for current shareholders, as well as allowing the outsourcer to achieve its target of net debt of less than 1.5 times its earnings by the end of 2019.
Debbie White, chief executive of Interserve, said: “This progress on the Deleveraging Plan is excellent news for all our employees, customers and suppliers.
“It will provide us with a strong balance sheet and enable us to move forward with confidence and the ability to improve our business and deliver our long-term strategy.”
The final form of the debt plan will be announced in early 2019.
The restructuring comes at a sensitive time for the outsourcing sector, following the collapse of Carillion in January, which led to thousands of job losses.