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Interserve To Go Into Administration

Written by Robert Moore Marketing Manager 15 March 2019

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Subcontractors given assurances by the Government http://www.constructionenquirer.com/2019/03/19/cabinet-office-promises-interserve-subbies-will-get-paid/

Interserve rescued as creditors take over as soon as they went into administration, after their rescue plan was rejected. 

The appointed administrators were Earnst & Young, with assets of Interserve monving to a newly incorporated company, of which the groups' lenders own. All exisiting shareholders thus will be wiped out. 

There is not yet any comment on the future of the management team, though it has been said that it is ''business as usual'', for other stakeholders.

In the sale, around £485m of existing debts is believed to be involved. It is still mid-process, with a deal expected to become wholly complete on Monday..Keep your eyes peeled for more!

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D-Day today as the rescue plan is debated.  Government has indicated that it has a rescue plan ready for the weekend to ensure continuity of business if the business goes into administration....  Shareholders will be wiped out in the event but jobs will be saved.

The problems at Interserve are well documented and have echoes of Carillion that ended up in liquidation early in the year.  Carillion was owed huge sums of money in the Middle East and was pursuing contracts at all costs.  Interserve is not in quite the same situation.  However,  it does have £600m+ worth of debt and it is seeking refinancing. The banks will convert their debt to shares, at a massive discount, effectively handing control to its creditors. The shares have now fallen by 80% in the year.  Read the company's press release here.

In the latest twist the shareholders are incensed by the lenders proposal which will see all the equity virtually wiped out and are putting together a plan B where they retain 30% of the equity.   The crunch meeting is to be held 15th March

Administration likely if Shareholders Cannot Agree

The lenders to Interserve have lined up EY as administrators for the company if the talks fail.

Interserve is a major contractor to the British Goverment, in fact it is bigger than Carillion with 75,000 employees worldwide and many of its contracts are loss making. 

So what will happen?  It is worth noting that Carillion was, in effect, bailed out by the government in that most of the contracts were moved across to other companies and the government promised to fulfil these.  Thousands of jobs were saved as a result.  They called it a liquidation as there was no real money for it to continue to trade and it would not look good if the government was, in effect, funding an insolvent company.

Interserve announced on Monday it had been awarded a £25m contract from Cwm Taf University Health Board as part of a £36m pound redevelopment of Prince Charles Hospital in Merthyr in Wales and this has resulted in a bump up for its share price.  The Government has also said that it would continue to grant it contracts.  Without the government saying it would be awarding it contracts in the furture would mean certain collapse.   If the business was put into administration it is actually likely that the operational side of the business will continue after a so called pre-pack administration so it will be the shareholders who will be wiped out. 

It is likely that there will be an increase in infrastructure spending in the future and there may be end in sight for austerity so they are best positioned to take advantage of this.

Brexit has dominated the debate these last few months and another collapse of a major goverment contractor would not be good news.  Are they too big to fail?

If you are a supplier to Interserve then read our page re Carillion if you fear the worst.

Categories: What is administration, Pre Pack Administration Process and Procedures, Worried Director What Will Happen To Me After Liquidation?

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