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Sun March 24 2019

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Interserve pressed to surrender RMD Kwikform

21 Dec 18 Faced with a crippling debt burden, Interserve has reached agreement in principal with its lenders on a way out. But some crucial points remain under debate.

It has been agreed that the lenders will take some, but not all, of the equity in the business, leaving Interserve with a more manageable level of debts. But the lenders also want RMD Kwikform as part of the deal.

Interserve’s year-end debts are approaching £650m. Its market capitalisation is little over £16m.

In 2017 Interserve’s EBITDA (earnings before tax, depreciation and amortisation) was £116m and it ended the year with net debt of more than £500m, giving it leverage of 4.3 net debt / EBITDA.

The deleveraging plan is targeting leverage of less than 1.5x net debt / EBITDA by the end of 2019.

The key commercial principles on which the deleveraging plan is expected to be based have now been conditionally agreed between Interserve and all lenders, the board announced this morning.

“Debt retained by Interserve will have terms consistent with the debt of a well-capitalised UK corporate,” it said.

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A large part of the debt will be converted into new shares for the lenders. This means that existing shareholders will see their stakes diluted, but at least it could stop them becoming totally worthless.

A portion of the new equity will be offered to existing shareholders and new investors through a public offering.

It also looks like Interserve may have to hand over RMD Kwikform to its lenders. The falsework and formwork division is a successful and profitable international niche business that is no longer core to Interserve’s increasing focus on support services. It is the smallest but most profitable part of the group. A sale of the unit has already been investigated before but eventually rejected by the board.

The lenders now want to take over full ownership of RMDK as part of the debt reduction deal but the Interserve board is dragging its collective feet on this one.  “Consideration is now being given to whether it would be in stakeholders' interests for the board to agree to lender requests,” the board said.

In addition, lenders have given Interserve a three-month extension on a payment due under its principal debt facilities on 1st February 2019 to 30 April 2019.

Interserve chief executive Debbie White said: "This progress on the deleveraging plan is excellent news for all our employees, customers and suppliers. It will provide us with a strong balance sheet and enable us to move forward with confidence and the ability to improve our business and deliver our long term strategy."

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