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Interserve’s confirms largest shareholder proposed new terms for its rescue restructuring but says its plan the only way forward

Coltrane Asset Management has suggested a new deal, according to CityAM, which involves issuing at least £110mln of new Interserve shares, to be offered to shareholders pro rata and underwritten by the hedge fund
Interserve sign
The Coltrane deal would also convert £435mln of the firm’s £631.2mln debt into equity, giving lenders 55% of the firm and existing shareholders 37.5%

Interserve PLC’s (LON:IRV) saw its shares jump on Tuesday after the group confirmed that its biggest shareholder, Coltrane Asset Management has written to the struggling outsourcing group’s board to propose new terms for its rescue restructuring.

The US hedge fund – which has a 27% stake in Interserve - has attacked the company over its handling of the badly needed Deleveraging Plan l because it originally stripped existing shareholders of 97.5% of the firm, handing it to its lenders.

READ: Interserve sweetens terms of rescue package as it looks to win over angry shareholders

When Interserve suggested new terms last Wednesday, which only doubled residual shareholder value to 5%, Coltrane directors threatened to sue the group, calling it a "terrible" deal, newspapers reported.

Coltrane, which is owned by financier Mandeep Manku, has suggested a new deal, according to CityAM, which involves issuing at least £110mln of new Interserve shares, to be offered to shareholders pro rata and underwritten by the hedge fund.

The deal would also convert £435mln of the firm’s £631.2mln debt into equity, giving lenders 55% of the firm and existing shareholders 37.5%, assuming full take-up of shares, the newspaper said. Interserve’s deal currently offers lenders 95% 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 £75mln, essentially a short term loan, to help the company get its finances back on track, CityAM added.

Interserve remains open to considering any proposal

In a statement today, Interserve said it had reviewed the proposal it received from Coltrane on 4 March with its advisors. It pointed out that the Coltrane proposal requires the consent of the group’s lenders, bonding providers and Pension Trustee to be capable of implementation.

The group said its board has asked Coltrane for its consent to share the proposal with these parties and their advisors, but this request has been refused despite the fact that the key terms of their proposal have been made public by the US hedge fund group.

Interserve added: “The ability to obtain lender support for a materially different deal requiring lenders to take significantly larger write-offs, or provide ongoing support, in the short time frame available is therefore unknown.”

The company said its board remains open to considering any proposal “which provides liquidity and a deleveraging solution that is capable of implementation in the time frame available.”

“However,” it added, “the Board continues to recommend that shareholders vote in favour of the Deleveraging Plan, which is currently the only plan that is capable of implementation in order to provide sufficient liquidity, cash and bonding facilities to allow the Group to service short term obligations and secure a stable platform for the business.”

Critical time for Interserve

Glyn Barker, Interserve’s chairman of Interserve, commented: “This is a critical time for Interserve. The proposed Deleveraging Plan, recommended by the Board, is the result of a long period of intensive negotiation to align stakeholders behind a plan to strengthen the balance sheet and secure a strong future for the business.

“It is the only plan today that provides a certain future for Interserve, preserving some value for shareholders while securing jobs, pensions, and continuity of services. In the absence of any other plan that is capable of implementation, further uncertainty continues to risk an outcome in which there is no return to shareholders, including Coltrane, and considerable disruption to the business.”

Interserve’s chief executive Debbie White is due to hold meetings with the firm’s major shareholders in coming weeks in a bid to secure the 50% approval at a general meeting on 15 March that the rescue plan needs to go ahead.

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

In afternoon trading, Interserve shares were 12.1% higher at 17.71p, easing back from an earlier peak of 20.48p..

 -- Adds Interserve comment, updates share price --

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