Shareholders wiped out, 14 Months after competitor Carillion Collapsed.

Shares in UK outsourcing giant Interserve, which employs over 65,000 people worldwide including 45,000 in the UK, were suspended today after almost 60% of the firm’s shareholders, led by the US hedge fund Coltrane Asset Management, rejected a last-ditch debt-for-equity swap with Interserve’s creditors that would have diluted the shares of current stockholders to nearly nothing, leaving them just 5%. The company has thousands of government contracts, including for hospital cleaning, probation services, school meals and the maintenance of military bases.

Interserve now faces a “pre-pack” administration that — it is hoped — will see its various divisions and 45,000 UK staff insulated from the fallout. The firm’s lenders, including HSBC and RBS, and bondholders, will agree to write off £485 million of Interserve’s crippling £631 million debt and inject £110 million of additional funds, in return for ownership of the company’s stock. By Friday’s close, all of Interserve’s business and assets are expected to be transferred to a newly-incorporated company, which will be owned by the existing lenders.

Current stock holders are out of luck. They’d already seen the stock tumble 96% over the past two years, will now be wiped out altogether. That includes Coltrane, which owned 28% of the shares and has threatened to take legal action for unfairly favoring lenders over shareholders…

Continue reading the article