The Interserve board says that its debt reduction plan – giving most of the company to the banks in exchange for writing off debt – is the only way to save the company from falling into administration.
US hedge fund Coltrane Asset Management, which controls 27% of Interserve’s shares and is the biggest shareholder, opposes the plan as it would leave current shareholders owning just 5% of the business. Coltrane has tabled an alternative proposal that would leave shareholders with 37.5% of the business and also wants the entire board sacked except for chief executive Debbie White. The board’s plan will be put to a vote of shareholders on Friday this week (15th March).
If the board is defeated, the company will be put into administration and, under a pre-pack deal that is already arranged, the banks would take full ownership and leave the shareholders with nothing.
Shareholders are therefore being asked to decide between getting not very much or nothing at all. Coltrane is reported to be planning legal action.
Interserve has already improved its offer to shareholders once; the original plan was to leave them with just 2.5% of the equity.
Sky News reports that the board has had talks with its lenders about letting existing shareholders keep 7.5% of the equity, instead of 5%. But it is not clear whether this will be put to the shareholders on Friday or if it will be enough to satisfy Coltrane.
The Interserve board confirmed that it has been in discussions with Coltrane and its lenders which have sought to establish the basis on which Coltrane would support the company's restructuring proposal.
It said: “Although the board is seeking to improve the position of all shareholders, there is no certainty that it will be able to do so in the very limited time available. The only proposal which is currently capable of being implemented is the recommended deleveraging plan through which, inter alia, shareholders will retain 5% of the equity of the restructured Interserve with the ability to acquire further equity through the open offer.”
In an interview with the Sunday Times last weekend chief executive Debbie White urged shareholders to think not just of themselves and the investors they represent but also of the thousands of Interserve employees whose jobs would be at risk if the company goes into administration.