Outsourcer Interserve reports £600m debt
10 Dec 2018
Fears are growing around the fate of Interserve, one of the biggest suppliers of services to the government, which is in financial crisis as it tries to renegotiate an estimated £600m of debt, with concerns it could collapse in a similar fashion to outsourcer Carillion
10 Dec 2018
Interserve employs 75,000 people worldwide, with 45,000 in the UK, and provides a wide range of services to nursing homes, schools, hospitals and prisons. Of its turnover of £3.2bn, 70% comes from the government.
Interserve has reported difficulty servicing around £600m of debt incurred after expanding into new areas of operation. A £834m rescue package with lenders was agreed in March, but increasing interest costs and other pressure mean it is now trying to organise a refinancing package.
It is currently planning a debt-for-equity swap which would see ‘a material dilution for current Interserve shareholders’. In a statement, Interserve said: ‘The fundamentals of the business are strong and the board is focused on ensuring Interserve has the right financial structure to support its future success.’
The company said its options included bringing ‘new capital into the business and progressing the disposal of non-core businesses.’ Any plan would be formally announced next year but the company’s stocks have fallen 70%.
The Labour party has called for a temporary ban on Interserve bidding for public contracts while the discussions take place. Jon Trickett, Labour’s shadow minister for the Cabinet Office, said: ‘The government must ensure all contracts with Interserve are reviewed and they are prevented from bidding for public sector contracts until they have proved they are financially stable and there is no risk to the taxpayer.’
Interserve currently has a number of key government contracts, such as cleaning, security, waste management and maintenance deals with hospitals, and providing school meals, while its infrastructure projects include improving the M5 Junction 6 near Bristol, refurbishing the Rotherham Interchange bus station in Yorkshire, and upgrading sewers and water pipes for Northumbrian Water.
The company is also the largest provider of probation services in England and Wales, supervising about 40,000 ‘medium-low risk offenders’ for the Ministry of Justice.
A Cabinet Office spokesperson said: ‘We monitor the financial health of all of our strategic suppliers, including Interserve, and have regular discussions with the company's management. The company successfully raised new debt facilities earlier this year, and we fully support them in their long term recovery plan.’
The failure of Carillion in January 2018 put thousands of jobs at risk and cost the taxpayer £148m.
Report by Pat Sweet