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Interserve: tough on tracker funds

06/02/2019

UK

Interserve workers in high vis and hard hats on a construction site
Swapping debt for new shares seems to be the only way to rescue outsourcer Interserve. But a recovery plan will leave existing investors with just 2.5% of the company.

Interserve’s (IRV) rescue plan has left its current shareholders with just 2.5% of the beleaguered company. The outsourcer, whose shares have fallen 98% from all-time highs, will now be majority owned by the banks and other creditors which backed a £75m rights issue and have agreed to swap part of the company’s debt for shares. It’s a slightly better outcome to the Carillion debacle – which collapsed into liquidation last year, leaving investors with nothing – but only just.

Stephen Rawlinson, an analyst at Applied Value, said existing shareholders, “are between a rock and a hard place”. They still get to vote on the deal – which seems to be the only option to rescue the company – but will be left with virtually nothing.

What has gone wrong at Interserve?

Reliable contracts for maintaining schools and hospitals under PFI schemes provided bumper profits for Interserve in the 1990s, meaning the company’s share price rose 697% between its IPO in…

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