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UK's Interserve seeks rescue deal amid $800m debt

The construction giant's restructuring plan comes after Carillion collapsed this year

Interserve CEO Debbie White said the UK company was making 'good progress' on its rescue plan.
Interserve CEO Debbie White said the UK company was making 'good progress' on its rescue plan.

UK construction and outsourcing company Interserve, which holds major contracts in the Middle East, is seeking a rescue package as it struggles with more than $800m of debt. 

Interserve's work with creditors to restructure its balance sheet comes after struggling UK contractor Carillion collapsed earlier this year.

Shares in Interserve, which is operational in Saudi Arabia, UAE, and Oman, fell sharply following news of a potential debt-to-equity swap deal.

READ: Interserve better placed than Carillion amid financial concerns

The company's board said it was exploring all options with its financial advisers to support its longevity, stressing that it remained in “constructive discussions” with lenders about a deleveraging plan.

A full breakdown of the plan, which is subject to shareholder approval, will be announced by Interserve early next year.

The programme could see Interserve swap its debt for equity, “an element of which may be sold to existing shareholders and potentially other investors,” the company said.

This could lead to some “material dilution for current Interserve shareholders,” it added.

READ: GCC contractors must learn from Carillion's mistakes

Interserve works on prisons, schools, hospitals, and roads in the UK, and the country's government is said to be supportive of its long-term financial recovery plan. In the Middle East, Interserve boasts a number of associate and subsidiary companies operating in engineering, construction, facilities management, and formwork. These include Khansaheb, Douglas OHI, oil and gas firm Adyard, and RMD Kwikform. 

In a statement announcing the company's deleveraging plan, Interserve's chief executive officer, Debbie White, said: “We are making good progress on our deleveraging plan, which we expect to announce early in 2019.

“Our lenders are supportive of the deleveraging plan, which will underpin the long-term future of Interserve. Our discussions with our lenders are a positive step in the process that was agreed as part of the April refinancing. The UK Cabinet Office has also expressed full support for the work we are doing to implement our long-term recovery plan.”

She stressed that the core functions of the business “remain strong” and the plan will give the struggling business “a solid foundation on which to build the future success of the group.” 

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Construction Week - Issue 754
Nov 23, 2019