Interserve Plc confirms “Deleveraging Plan” to manage its Rising Debts

Interserve Plc, one of the UK’s largest Security and Facilities Management Contractors has announced it is seeking a new rescue deal with the support of the Cabinet Office to restructure its debts, projected to rise to more than £600m by the end of this year.

Interserve employs 75,000 people worldwide and manages service provision at sites ranging from The Ministry of Defence’s training base on Salisbury Plain to King George Hospital, East London.

On 23 November 2018, the Interserve Board announced that it is working with its advisers to look at all options to deliver the optimum capital structure for the group to support its long-term, sustainable development.

Interserve and its lenders are engaged in constructive discussions regarding the agreement and implementation of a deleveraging plan which would deliver a strong balance sheet with Interserve targeting leverage of approximately 1.5x net debt/EBITDA. These discussions also involve proposals to amend the Group’s current financing agreements, including the extension of the maturity dates and repayment profiles of the existing facilities.

Interserve will be announcing its finalised deleveraging plan, which will be subject to shareholder approval, in early 2019. Although the form of the deleveraging plan remains to be finalised, it is likely to involve the conversion of a substantial proportion of the Group’s external borrowings into new equity, an element of which may be sold to existing shareholders and potentially other investors. If implemented in this form, the deleveraging plan could result in material dilution for current Interserve shareholders.

Debbie White, CEO of Interserve has stated that Interserve continues to trade well and in line with its expectations for the year ending 31 December 2018.

“We are making good progress on our deleveraging plan which we expect to announce early in 2019. Our lenders are supportive of the deleveraging plan which will underpin the long-term future of Interserve. Our refinancing in April of this year contemplated the development of a deleveraging plan in consultation with our stakeholders and the liquidity injected at that point also gave us the funding to execute our business plan. Our discussions with our lenders are a positive step in the process that was agreed as part of the April refinancing. The Cabinet Office has also expressed full support for the work we are doing to implement our long-term recovery plan.

The fundamentals of our business remain strong. The deleveraging plan will give Interserve a strong long-term capital structure and provide a solid foundation on which to build the future success of the Group.”

It is also understood that Interserve has been awarded a £25m contract with Prince Charles Hospital in Merthyr by Cwm Taf University Health Board, as part of the next phase of the £36m redevelopment of Prince Charles Hospital in Merthyr which is to be funded by Welsh Government.

Work is scheduled to start on the project December 2018 with completion by spring 2021.