Interserve, the British outsourcer and one of the UK government’s biggest contractors, has collapsed into administration, wiping out shareholders and raising question over the long-term future of a business that employs 65,000 jobs worldwide.
The takeover by debt holders is a serious blow to the sector that has been hit by contract scandals and profit warnings, even before the liquidation of rival government contract Carillion last year.
Interserve employs 45,000 people in the UK, twice the number of Carillion and delivers state services including probation and home nursing, as well Facilities management as well maintenance and building of schools, hospitals and offices. Some of the staff will be transferred to new management established by the company’s administrator EY, and the debt holders that now own the company which include high street banks like HSBC and RBS as well as hedge funds Cerberus, Emerald Asset Management and Davidson Kempner Capital.
The existing board will be replaced with the retention of Debbie White CEO and Mark Whiteling finance director who were hired, when the company first ran into trouble almost three years ago after a catalogue of acquisitions and an incursion into energy from waste contracts.
Interserve’s turnover of £2.9bn , 70 per cent of which comes from the government, which has indicated it will continue the contract with the company.
Jon Trickett, a Labour shadow Cabinet Office minister, said the “ government has clearly learnt nothing from Carillion’s collapse adding that his party would end this reckless outsourcing once and for all when it comes to power”.
A Cabinet Office spokesperson however said £ “ This announcement will not affect jobs or the provision of public services delivered by Interserve. We are in close contact with the company and we are confident a positive way forward will be found.”
Shares in Interserve which has over 16, 500 smaller shareholders were suspended yesterday rendering them worthless although the company has insisted that the pay of employees, pensioners and sub-contractors would be protected with lenders promising to wipe out the company’s £738m of debt and inject £110m into the business.
Construction sub-contractors have been taking their tools home in case there are site closures.
Yesterday the Interserve’s management and lenders were defeated in their plan for a debt-for-equity swap that would have enabled shareholders to retain 5 per cent of the company’s equity.