Interserve’s biggest shareholder issues fresh demands for rescue deal which increases investor value

Struggling outsourcer Interserve’s biggest shareholder, which last week threatened to sue the company over its handling of a rescue deal, has written to the board to propose new terms for the restructuring.

Coltrane Asset Management, a US hedge fund and 27 per cent shareholder, has been railing against Interserve’s suggestions of a deal with its lenders for the last month because it originally stripped existing shareholders of 97.5 per cent of the firm, instead handing that equity to lenders.

Read more: Top Interserve shareholder threatens to sue outsourcer

When Interserve suggested new terms on Wednesday which doubled shareholder value to five per cent, Coltrane’s directors were so incensed they threatened to sue the outsourcer, calling it a "terrible" deal.

The fund, owned by financier Mandeep Manku, on Monday suggested a new deal which involves issuing at least £110m of new shares in the company, to be offered to shareholders pro rata and underwritten by Coltrane.

The deal would also convert £435m of the firm’s £631.2m debt into equity, giving lenders 55 per cent of the firm and existing shareholders 37.5 per cent, assuming a full take up of shares. 

The previous deal offered lenders 95 per cent of the firm for converting the same amount of debt into equity.

Coltrane also said it would offer the company a bridge facility of up to £75m, essentially a short term loan, to help the company get its finances back on track.

A spokesperson for Coltrane said: “Given that a better proposal for a greater number of stakeholders is now on the table the directors, in their capacity as fiduciaries to the company, should halt cooperation with lenders on implementation of their plan.

“If the company is not able to make such a decision then this raises serious questions about the board’s decisions leading to this point, and about the position of the lenders, including major UK banks.

“Throughout this process, the board has prioritised discussions with lenders rather than shareholders, limiting the company’s options and reducing the scope for a solution that addresses the interests of all stakeholders.”

Chief executive Debbie White will hold meetings with the firm’s major shareholders in coming weeks in a bid to secure the 50 per cent approval of her own plan at a vote on 15 March that is needed for it to go ahead.

If the debt-laden outsourcer cannot pass a plan, it will go into a pre pack administration which will be handled by EY.

Read more: Interserve chairman: Revised rescue deal is 'only viable option'

Workers at the NHS and the Foreign Office are among Interserve’s 39,000 UK employees, and 70 per cent of its annual £2.9bn turnover comes from the government.

City PM has approached Interserve for comment.