Interserve to go into administration after rescue deal rejected

Interserve fears

Interserve has thousands of government contracts such as hospital cleaning, school meals and maintenance of military bases in the Falklands.

The news that Interserve was set to go into administration came after shareholders refused to approve financial restructuring plans to rescue the company, after an emergency meeting.

The troubled outsourcer, which employs 45,000 people in the United Kingdom to clean schools and hospitals, run probation services and build roads and bridges, had been battling to avoid a collapse like Carillion after it hit trouble about three years ago.

Interserve said: 'The board of directors of the company is convening an urgent board meeting to consider its options.

Ahead of Friday's vote, Sky News reported that Coltrane had written to EY to urge them against a pre-pack insolvency deal.

"In the absence of any viable alternative, it expects to implement an alternative deleveraging transaction, which is likely to involve the company making an application for administration and, if the order is granted, the immediate sale of the company's business and assets to a newly-incorporated company, to be owned by the existing lenders".

Lenders such as RBS, HSBC and BNP Paribas - together with Emerald Asset Management and Davidson Kempner Capital - are expected to seize control once the process is complete.

Interserve fears
Interserve looks set to avoid a Carillion-style collapse

It would have resulted in existing investors seeing their holding slashed to just 5 per cent.

Interserve's shareholders voted 59 percent against a debt-for-equity rescue package at a general meeting in central London on Friday, in a victory for its biggest shareholder, U.S. hedge fund Coltrane, which owns a 28 percent stake and had opposed the plan.

Interserve's crunch vote comes 14 months to the day after Carillion, another major public sector outsourcer, collapsed owing £2bn to 30,000 suppliers, subcontractors and other short term creditors.

'Shambolic mismanagement is putting jobs on the line and services in jeopardy.

The Cabinet Office, which awards government contracts to firms like Interserve for the delivery of public services and is the company's largest client, is understood to have been in regular contact with the firm in recent months.

Barker had warned against rejecting the rescue plan and forcing the firm into administration, arguing it would be "more disruptive to the company, significantly more costly and would deprive shareholders of any value whatsoever". Workers will be expected to continue working normally unless specifically told otherwise'.

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