Interserve Group, one of the Top Ten security solutions providers in the UK (through First Security and Knightsbridge Guarding) and also one of the nation’s largest outsourcing contractors overall, has reached an agreement with its creditors in a bold bid to confront the Group’s rising debts and fend off any possibility of a Carillion-style collapse.
Interserve Group has a current market value of £17 million, which is way down from the £500 million figure of 2017 and the £1 billion figure of 2014. Present turnover is somewhere in the region of £3.2 billion. Around 70% of that reported turnover emanates from Government-focused contracts.
The firm’s lenders include HSBC, RBS and BNP Paribas, as well as Emerald Asset Management and Davidson Kempner Capital. Those lenders have agreed to assist in reducing Interserve Group’s debts from £600 million to around the £275 million mark by dint of issuing £480 million worth of new shares. The plan is that these will be swapped with creditors for debt.
The plan is that the RMDK Kwikform construction business will remain part of the consolidated Interserve Group. As part of the transaction, £350 million of existing debt will be allocated to RMDK, of which £169 million will be cash-pay and £181 million converted into a subordinated non-cash pay debt instrument. The debt allocated to RMDK will be non-recourse to the rest of the Interserve Group and have maturities extended to 2023. Reports in the national media, however, have suggested that the Cabinet Office is understood to have advised against this element of the plan.
Existing lenders will provide an additional £75 million of new liquidity through the provision of a new debt facility with a maturity of 2022. The bonding providers will provide additional bonding facilities to the Interserve Group as required by Interserve’s business plan.
The new Interserve Group equity will be provisionally placed with existing lenders and subject to claw back in full by existing Interserve Group shareholders through a fully pre-emptive open offer (ie the ‘Placing and Open Offer’).