Outsourcer Interserve to issue new shares in bid to cut debt

© Reuters. FILE PHOTO: Interserve offices are seen in Twyford

(Reuters) – Troubled British support services provider Interserve (LON:) Plc said on Wednesday it would raise £435.2 million in cash through an issue of new shares as part of its plan to cut debt and avert a collapse like Carillion.

Interserve said earlier this month that it had struck a rescue deal that would have lenders take control of the company by swapping millions of pounds worth of debt for new shares, giving the outsourcing group a chance of survival.

Separately, Interserve also reported a smaller loss before tax of £111.3 million for the 12 months ended Dec. 31, but said Britain’s construction market remains volatile because of the country’s impending exit from the European Union and a hit to construction confidence after the high profile fall of Carillion.

“The period (2018 and the first few months of 2019) has been the most difficult in Interserve’s history since the group was established in 1884,” Chairman Glyn Barker said in a statement.

“The resulting stress and uncertainty have led to anxiety amongst our staff, suppliers and customers and significant loss of value for our shareholders,” he added.

Barker admitted that the business had lost its operating and financial discipline, became too federated and inefficient, lacked a coherent approach and entered some businesses it should not have done.

Interserve is one of Britain’s biggest outsourcing and construction companies, delivering contracts including cleaning hospitals and serving school meals.

Interserve said the new issue would be priced at 15.3 pence per new share and 19 new shares for every 1 existing share. The new shares issued through the placing and open offer will account for 95 percent of Interserve’s share capital.

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Net debt rose to £631.2 million in 2018, pushed up by costs from some contracts and projects.

Interserve said earlier this month that it would cut debt by more than half after creditors wrote off loans in return for new equity. Existing shareholders, who saw the company lose 90 percent of its value in 2018, will largely be wiped out.

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