Interserve, one of the government’s largest contractors, was on Friday saved from administration by debtholders after shareholders voted against the company’s rescue deal.
The debtholders – including banks Royal Bank of Scotland PLC (LON:RBS) and HSBC Holdings PLC (LON:HSBA) and hedge funds Cerberus, Angelo Gordon and Emerald Investment Partners —agreed to wipe £480mln of debt and inject £110m equity in exchange for taking over hundreds of Interserve’s smaller operating businesses.
The deal allowed the contractor to continue trading and about 69,000 employees worldwide to keep their jobs.
GMB said Interserve was awarded public contracts worth hundreds of millions of pounds before entering administration despite announcing a slew of profit warnings.
Citing figures from data provider, Tussell, GMB said the largest contract handed to Interserve last year was a £66mln deal in July with the Foreign and Commonwealth Office to run facilities management services.
The union said the company was awarded a further £6mln in public contracts in December despite proposing a debt-for-equity rescue deal to address its debt pile of nearly £700mln – shareholders voted against this plan on Friday.
In total, Interserve had about £2bn in government contracts for providing public sector services, including cleaning and maintenance for schools, hospitals and railway stations, as well as work for the Ministry of Defence and the Armed Forces.
GMB said it mirrors what happened in the run-up to the collapse of rival contractor Carillion, which had £1.3mln of government contracts at the time.
Key Interserve suppliers face heavy financial losses
Interserve’s key suppliers now face heavy financial losses as they could lose their contracts or not be paid for work carried out.
Its suppliers include about 200 companies that provide IT, HR and property management services to the group.
The suppliers will be told this week whether their services are still required.
Administrator, Ernst & Young, said unsecured creditors would join the queue for a £600,000 fund.
“The small proportion of suppliers affected will be unsecured creditors and will all rank equally,” it said.
Mitie, Serco and Sodex said to be considering bid for Interserve's support services arm
Rival outsourcer Mitie Group PLC (LON:MTO) is understood to have approached EY to express interest in buying Interserve’s support services arm, according to Sky News.
Mitie’s chief executive Phil Bentley is said to be interested in a potential buyout worth between £100mln and £150mln for the business.
However, Interserve’s new owners are likely to value the unit at more than double that price given that it is the most profitable part of the group.
Interserve has been hit by its disastrous foray into energy from waste plants in the UK and payments disputes over a business providing training in the Middle East.