Credit, Collections & Insolvency News
Outsourcing specialist Interserve has entered into administration after the company’s shareholders voted against a rescue plan Shareholders voted 59.38% against the plan, which would have seen their stake reduced to just 5%, with lenders being handed the largest share of the business.
Last month it outlined a plan to reduce its net debt to £275m by issuing £480m of new Interserve equity. However, this new equity will be placed with the company’s existing lenders, who will then hold 97.5%, with ordinary shareholders left with just 2.5% of the equity in the company.
Administrators, EY are likely to carry out a pre-pack administration to avoid a Carillion-style collapse.
Interserve employs 75,000 people worldwide, including 45,000 in the UK, and has been in financial difficulty for some time, in part as a result of pressure on margin in the outsourcing business and expansion into sectors such as waste energy. It is responsible for a number of key government outpouring arrangements, including cleaning the London Underground. Workers at the NHS and the Foreign Office are among the 39,000 UK employees, and 70 percent of its annual £2.9bn turnover comes from the government. An expected pre-pack arrangement managed by EY would keep public services running smoothly for the immediate future, meaning jobs will not be lost in the short term.
Responding to the new the Federation of Small Businesses (FSB) National Chairman Mike Cherry said “The collapse of Interserve highlights once again the dangers of relying on a handful of outsourcing giants. At a time when political uncertainty is weighing heavily on small business confidence, this development will spark further fears across its supply chain.”
“A year on from Carillion’s demise, lessons still need to be learnt. We have to move to an environment where Project Bank Accounts are the norm for large public procurement projects, and big contracts broken up to provide opportunities for smaller firms. Doing so will diversify and de-risk supply chains, meaning higher performance.”
“Thankfully – following FSB’s tireless campaigning in this space – Interserve is one of a few big outsourcers with a living will in place. That means work should be handed straight on to new suppliers, helping to avoid a Carillion-style meltdown.”
“We will be checking that this takes places seamlessly and easily, and look to the Government to make sure it does. We continue to have promising conversations with other big firms that win large swathes of public contracts.”
“In future, providing those responsible for public procurement with the skills they need to divvy up contracts is a must. Without the expertise required to make that happen, it’s all too easy to hand big chunks of work to the same old faces.”
“So-called ‘aggregation’, which reduces competition and leads to these mega risks, has run its course.”
A spokesman for the Cabinet Office, which awards these contracts to firms like Interserve for the delivery of public services and is the company’s largest client, said: “This announcement will not affect jobs or the provision of public services delivered by Interserve. We are in close contact with the company and we are confident a positive way forward will be found.”