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Sat February 16 2019

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Interserve rescue plan piles debt onto RMD Kwikform

6 Feb RMD Kwikform, the concrete formwork business that is Interserve’s golden goose, is having £350m of debt dumped onto its balance sheet to save the rest of the group.

Interserve chief executive Debbie White
Interserve chief executive Debbie White

Interserve has today released details of its deleveraging plan to reduce its debt from around £650m to a more palatable £275m.

But its biggest shareholder is after blood and wants rid of the whole board except the chief executive.

The deleveraging plan that has been agreed with the lending banks is to issue £480m of new Interserve equity – converting debt to equity – and reallocate £350m of group debt to RMDK.

Existing lenders will provide an additional £75m of new liquidity through the provision of a new debt facility.

RMDK will remain part of the consolidated Interserve Group. Of the £350m debt it is being given, £169m will be cash-pay and £181m will be converted into a subordinated non-cash pay debt instrument. Crucially, the parent company will be insulated from it: the debt allocated to RMDK will be non-recourse to the rest of Interserve Group. RMDK has until just 2023 to pay it off or renegotiate.

Excluding RMDK, Interserve will have a pro forma net cash position of around £60m.

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Chief executive Debbie White, CEO of Interserve, said: "The board believes that this agreement will secure a strong future for Interserve.  This proposal has been achieved following a long period of intensive negotiation and has the support of our financial stakeholders and government.  Its successful implementation is critical to the Interserve Group's future and all of its stakeholders. The deleveraging plan will, alongside our 'Fit for Growth' transformation programme, place us in a strong position to deliver our strategy, be competitive in the marketplace and provide a secure future for the Interserve Group's employees, customers and suppliers."

But while the lenders have agreed to the plan, out-of-pocket shareholders are not happy.

Coltrane Asset Management, a New York hedge fund that holds 17.5% of Interserve, has requisitioned a general meeting of shareholders to sack the entire board except for Debbie White.

The requisition notice proposes resolutions that chairman Glyn Barker, finance director Mark Whiteling, executive director Dougie Sutherland and all the non-executive – Russell King, Anne Fahy, Nick Salmon, Gareth Edwards, and Nicholas Pollard – are removed as directors of the company. Only chief executive Debbie White retains the confidence of Coltrane.

In 2017 RMDK contributed £54.4m to group operating profit on revenue of £229m, while the support services business, managed only £41.7m profit on nearly £1.9bn of revenue. The UK construction business lost nearly £20m on revenues of more than £1bn.

MPU

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