Outsourcing giant Interserve has agreed a debt-for-equity swap with its lenders as part of plans to slash its near-£650m debt mountain and put the firm on a secure financial footing.
The Government contractor said the likes of RBS, HSBC and BNP Paribas - together with Emerald Asset Management and Davidson Kempner Capital - will seize control of the firm.
Under the terms of the deal, existing shareholders will be wiped out and Interserve’s net debt will reduce to £275m.
The group, which holds crucial contracts for a range of services in prisons, schools and hospitals, will also issue £480m of new equity as part of the arrangement.
Interserve’s building materials division, RMD Kwikform, will remain part of the group and £350m of debt will be secured against the lucrative unit.
However, one of the firm’s existing shareholders, the New York hedge fund Coltrane, has reacted angrily, calling for several directors to be removed from the company’s board and install David Frauman and Stuart Ross in their stead.
But Debbie White, Interserve chief executive, said: “The board believes that this agreement will secure a strong future for Interserve. This proposal has been achieved following a long period of intensive negotiation and has the support of our financial stakeholders and Government.
“Its successful implementation is critical to the Interserve group’s future and all of its stakeholders.
“The deleveraging plan will, alongside our ‘fit for growth’ transformation programme, place us in a strong position to deliver our strategy, be competitive in the marketplace and provide a secure future for the Interserve group’s employees, customers and suppliers.”
Shares in Interserve collapsed as much as 13 per cent at the open, but then settled flat at 13p.
The restructuring comes at a sensitive time for the outsourcing sector, following the collapse of Carillion in January, which led to thousands of job losses.