March 4, 2019 / 8:33 PM / 19 days ago

Interserve considers alternative rescue plan from top investor

(Reuters) - Interserve Plc said on Monday it was considering an updated proposal from its largest shareholder Coltrane Asset Management, as the loss-making British support services group tries to tackle its debt mountain.

FILE PHOTO: The Interserve logo is seen on a flag at Interserve offices in Twyford, Britain January 17, 2018. REUTERS/Peter Nicholls/File Photo

The latest move from Coltrane comes soon after the Reading-based outsourcer offered a sweetened rescue plan to its shareholders last week, under which they would retain five percent of the company as part of a debt-for-equity deal with lenders.

New York hedge fund Coltrane said on Monday it had written to Interserve’s board with an alternative plan, its second proposal in about two weeks.

Interserve said on Monday it had received the “updated” proposal from Coltrane and was considering it.

“A further announcement will be made in due course. In the meantime, the board remains committed to achieving a consensual deleveraging plan,” Interserve said in a statement.

Coltrane, which holds about 27.7 percent of Interserve, has proposed an issue of at least 110 million pounds of new shares pro rata to Interserve’s shareholders.

“This new issue and the conversion of 435 million pounds of debt in the company into equity at par would leave existing creditors owning 55 percent, with shareholders owning 37.5 percent, assuming a full take up,” Coltrane said in a statement.

Coltrane said it offered to bridge any interim liquidity gap that stems from the Interserve’s operating cash flow, which would “cure the primary trigger for the creditors’ ability to force a default and insolvency” of Interserve.

Interserve, which employs 68,000 people, maintains eight of Britain’s 10 busiest railway stations and cleans thousands of London Underground carriages, made a loss last year of 111.3 million pounds.

In February, Interserve had struck a rescue deal where its lenders would ultimately take control of the company in a debt-for-equity swap that would have largely wiped out existing shareholders.

Interserve then revised the rescue deal to double the stake existing shareholders will retain in the British outsourcer to five percent. Banks agreed to provide an additional debt facility of 110 million pounds, the company said last week, with a 435 million pound debt-for-equity fund raising.

The deleveraging plan is subject to a shareholder vote at an extraordinary general meeting on March 15, with another meeting due to take place on March 26 to consider Coltrane’s initial proposal.

Coltrane’s preliminary proposal included underwriting a 75 million pound equity fundraising alongside a significant conversion of debt into equity. Coltrane also then called for eight company directors to be replaced but said it supported Chief Executive Debbie White.

Interserve’s high level of debt had come under scrutiny after rival Carillion collapsed last year under a weight of debt and pension dues, forcing the government to step in to guarantee services.

Interserve’s net debt stood at 631.2 million pounds as of 2018 end.

Interserve shares, which have been on a downward spiral since April 2014 when they were trading at 745 pence, closed down 11 percent at 15.8 pence.

Reporting by Justin George Varghese in Bengaluru. Editing by Jane Merriman and Susan Thomas

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