Interserve in pre-pack administration

Troubled construction and outsourcing group Interserve has entered administration with EY, with all of the company’s assets immediately moving to a new specially formed company.

A restructuring plan for the business had been put forward by its lenders ahead of an Extraordinary General Meeting on Friday, based around a debt-for-equity swap that would have provided an additional £110m of liquidity, However, this was voted down, with US hedge fund Coltrane, the group’s largest shareholder, understood to have led opposition.

In total, 59% of the shareholding voted against the restructuring plan. Trading in the company’s shares was suspended as Interserve’s board moved towards the pre-pack deal, saying “the alternative transaction will be implemented very quickly and via a carefully-managed process, ensuring that the business will continue to operate as normal for customers and suppliers.

“It will provide the group with a strong financial position, allowing it to grow and develop the business, to deliver on its long-term strategy and protect the group’s employees, including the beneficiaries of the group’s pension schemes.”

The deal completed on Friday evening gives the business access to the required additional £110m of liquidity, as well as implementing the debt for equity swap and reducing the indebtedness of the group by some £480m, securing the jobs of  68,000 employees worldwide.

Hunter Kelly, partner at EY and joint aministrator, said: “Following the detailed contingency work we had carried out, it was clear that any period of uncertainty would have resulted in a collapse across the group. After the decision by shareholders to not support the Deleveraging Plan, we had to move fast to implement the contingency plan. Our evaluation of other options showed that there would have been greater loss to the creditors under the alternative options available.

“This transaction secured the jobs of 68,000 employees, the majority of whom work in the UK, as well as ensuring there was no disruption to the vital public services that Interserve provides to the UK Government. Following this transaction the operations of the Montana/Interserve group are continuing to trade as normal on a solvent basis as a result of access to the new liquidity and are not in insolvency.”

Projects Interserve is working on in the region include the replacement by cancer hospital The Christie of its fire-damaged Paterson Buildingby a new 270,000 sq ft building, and the £35m Rutherford Cancer Centre in Liverpool’s Paddington Village. The company missed out on landing a spot on the £1.5bn North West Construction Hub framework, it was reported in December.