Interserve’s board issued a statement today that makes it quite clear that it is the lending banks that are in charge, such is the fragility of its debt burden, not the shareholders.
The board’s deleveraging plan, revealed last month is for a debt to equity swap that would give the lenders ownership of most of the business, leaving the shareholders with just 5%.
That plan depends on shareholder support, which so far has not been readily forthcoming. Coltrane Asset Management, which holds 27% of Interserve, is strongly against and submitted an alternative proposal – involving a rights issue that it would underwrite and leave shareholders with 37.5% of the business, assuming they fully subscribed to the rights issue.
Yesterday afternoon (4th March) the Interserve board said they’d consider Coltrane’s proposal but rather indicated that they weren’t especially keen. [See our previous report here.]
This afternoon (5th March) they’ve thought about it and are clearly very not keen. And it is all starting to look less like a poker game and more like a stand-off.
This is the full statement that the board of Interserve just issued:
“The Coltrane Proposal requires the consent of the lenders, bonding providers and Pension Trustee to be capable of implementation. The board has asked Coltrane for its consent to share the Coltrane Proposal with these parties and their advisors, but this request has been refused despite the fact that the key terms of their proposal have been made public by Coltrane. The ability to obtain lender support for a materially different deal requiring lenders to take significantly larger write offs, or provide ongoing support, in the short time frame available is therefore unknown.
“The Coltrane Proposal requires that the board immediately halt the implementation of the deleveraging plan that was launched on 27th February 2019 and that is subject to shareholder approval on 15th March 2019. In light of the company's short-term liquidity requirements and given that Interserve's deleveraging plan is currently the only fully funded proposal which has the agreement of lenders, bonding providers and Pension Trustee, the board is unable to consent to this request without risking the future of Interserve together with its employees, pensioners, customers and suppliers.
“The board also notes that the Coltrane Proposal is non-binding and unfunded and remains subject to due diligence. There is therefore no certainty that Coltrane's proposal could be successfully implemented.
“The board will be providing more detailed feedback to Coltrane on its proposal today and confirms that the board remains open to considering any proposal which provides liquidity and a deleveraging solution that is capable of implementation in the time frame available.
“However, the board continues to recommend that shareholders vote in favour of the deleveraging plan, which is currently the only plan that is capable of implementation in order to provide sufficient liquidity, cash and bonding facilities to allow the group to service short term obligations and secure a stable platform for the business.”
Interserve chairman Glyn Barker, a former managing partner of PricewaterhouseCoopers, said: “This is a critical time for Interserve. The proposed deleveraging plan, recommended by the board, is the result of a long period of intensive negotiation to align stakeholders behind a plan to strengthen the balance sheet and secure a strong future for the business. It is the only plan today that provides a certain future for Interserve, preserving some value for shareholders while securing jobs, pensions, and continuity of services. In the absence of any other plan that is capable of implementation, further uncertainty continues to risk an outcome in which there is no return to shareholders, including Coltrane, and considerable disruption to the business.
"The board considers the deleveraging plan to be in the best interests of Interserve and all its stakeholders, including shareholders, as a whole. Accordingly, the board continues to unanimously recommend that shareholders support the deleveraging plan and vote in favour on 15th March."