Interserve Faces Fight With Shareholders Hammered by Rescue Plan

(Bloomberg) -- Interserve Plc, a beleaguered U.K. government contractor, announced a rescue plan Wednesday that hands control to creditors and sets the stage for a battle with shareholders who could be all but wiped out.

The cleaning and maintenance contractor plans to cut debt by more than half, swapping it for shares that would leave creditors holding 97.5 percent of the company, according to a statement.

The bailout comes little more than a year after the collapse of rival Carillion Plc, whose liquidation cost almost 3,000 jobs and left 30,000 suppliers and subcontractors with 2 billion pounds ($2.6 billion) in unpaid bills. That debacle, one of the biggest corporate failures in British history, led to calls from the opposition Labour Party for such services to be brought under state control.

The deal proposed Wednesday, which Chief Executive Officer Debbie White called “critical to the Interserve Group’s future,” has the backing of all the company’s creditors. But at least one shareholder is preparing to fight it.

Coltrane Master Fund, a New York-based hedge fund that holds more than 17 percent of Interserve, is engaging lawyers to help renegotiate the plan, according to people familiar with the situation who asked not to be identified because the matter is private.

Interserve said in a separate announcement Wednesday that Coltrane is calling for a shareholder meeting at which it intends to seek the removal of company directors including Chairman Glyn Barker and Chief Financial Officer Mark Whiteling.

Officials at Coltrane and Interserve declined to comment on the hedge fund’s strategy.

Under the current proposal, Interserve’s net debt will be cut by more than half to about 275 million pounds as it issues 480 million pounds of new shares to current creditors. Existing lenders will also provide an additional 75 million pounds of liquidity through a new debt facility maturing in 2022.

The agreement also involves the transfer of 350 million pounds of Interserve’s consolidated debt to its RMDK subsidiary, which contributed 54.4 million pounds to group operating profit in 2017, according to Interserve’s annual report.

The company said in December it aimed to cut net debt to around 1.5 times earnings amid discussions with its bankers. It reported net debt of 614 million pounds as of June 2018. The debt-for-equity swap announced on Wednesday will lower indebtedness to less than 1 time earnings, excluding the RMDK debt, according to Wednesday’s statement.

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