Interserve battles to avoid administration as shareholder vote looms on Friday
Interserve is facing a battle for survival with less than five days left to convince shareholders to save the business from administration, with the added threat of legal action hanging above its directors.
The board, including boss Debbie White, face an uphill battle trying to balance the interests of biggest shareholder Coltrane Asset Management on one side, and lenders on the other.
Read more: Interserve wins over major shareholder Aberdeen Standard Investments
The struggling outsourcing company's directors face personal risk as Coltrane has warned it could take legal action to hold them personally accountable for the company’s losses.
Shareholders are set to descend for a final crunch meeting on Friday to vote on a proposal to keep administrators from the gates.
Interserve has tabled a deal that would see shareholders keep just five per cent of the company, with lenders splitting the rest between themselves.
The company still thinks a positive outcome on Friday is achievable, a source told City PM, but one director told the BBC that Interserve faces “a mountain to climb” to prevent the company collapsing under its £650m debt pile.
Pressure from Coltrane, which owns almost 28 per cent of Interserve, already forced the board to raise shareholders’ stake from 2.5 per cent to five per cent in the deal.
However, this was not enough for the New York-based hedge fund, which has demanded a better deal for shareholders. It has threatened to scupper the deal, a move which Interserve said would force it into administration.
A source close to Coltrane accused the board of having “spectacularly mismanaged a perfectly sound company, to the point that it has handed all power to the company’s lenders.”
“If the company goes into administration on Friday, that will be entirely as a result of the failures of the board, and the pressure from lenders. It is entirely avoidable, given [Coltrane’s] offer of bridge funding. The company has been unable to pursue this solely because the board signed away its rights to be able to rescue itself,” the source said.
A source close to Interserve said: “The bridge funding offered by Coltrane is not sufficient to cover the group’s pre-completion working capital requirements.”
The company’s troubles come just over a year after the collapse of Carillion, another outsourcing giant. However, Interserve’s operating companies are likely to survive a so-called pre-pack administration, leaving shareholders as the main losers.
Today, the final Sunday before the vote, Interserve launched a double volley against its naysayers, as chief executive Debbie White and chairman Glyn Barker called on shareholders to back the deal.
Despite resistance from its largest investor, the board has still won the backing of proxy shareholders Aberdeen Standard Investment, Glass Lewis, Pensions and Investment Research Consultants, and Institutional Shareholder Services.
Read more: Interserve board rebuffs rebel shareholder's demands for new rescue plan
Glass Lewis said: “While we recognise that Coltrane has publicly put forth a competing financing alternative for the company, we believe that the Coltrane proposal is not actionable at this time given the preliminary nature of the proposal and the lack of support from the company’s key stakeholders.”
MPs are expected to raise the company’s plight in parliament this week.