Beleaguered outsourcing firm Interserve which is ranked as highest government contractor in Britain has filed for bankruptcy rescue after shareholder rejected a proposal for rescue. The shareholders voted against a debt for equity based rescue package at a meeting held in London late this week by 59%. This rejection by shareholders is a big win for Interserve’s largest shareholder Coltrane which owns stake of 29% in Interserve and was opposed to the rescue plan. Now the firm will have to go in for a “pre-pack” administration plan that will be overseen by EY in which will enable the sale of its assets by creditors.
Interserve presently provides various public services ranging from school dinners to hospital maintenance and stated that this form of arrangement will help to continue offering its services while business side of dealings go on. Trading of the firm’s shares has been suspended and Chairman Glyn Barker told investors that it is struggling with a crippling financial burden that is unsustainable. He had requested investors to go ahead with the rescue plan as forcing it into administration would be disruptive and expensive and would deprive them of any remaining value in its stock.
The firm currently employs 68,000 worldwide of which around 45,000 are in Britain alone. The profitable firm ran into problems after it made a string of acquisitions and worthless contracts that weighed down its finances and increased debt raising doubts that it could to the insolvency path like rival Carillion. Representative of Interserve workers GMB Union stated that its turmoil showed that the process of outsourcing contracts of public sector holdings to private firms was an unprofitable experiment. The rescue plan that was rejected could have managed Interserv’s lenders as 95% of the firm’s ownership could be exchanged for cancellation of debts worth 485 million pounds while holdings of existing investors would get diluted to just 5%.