Interserve, the struggling outsourcing group, is drawing up plans to hand its £250m building materials unit to its lenders as part of an ambitious plan to secure the company’s future.
Sky News has learnt that Interserve and its advisers are examining the option of spinning off RMD Kwikform, one of its most profitable businesses, to the holders of hundreds of millions of pounds of its debt.
If it pursued the proposal, it would leave the remainder of Interserve as a more focused support services business.
The plan is at an early stage and may not get formal approval from Interserve’s board, although it is said to have indicative support from some of the company’s lenders.
“It would make the rest of the company – if it stayed listed – a much cleaner story for stock market investors,” one City source said this weekend.
RMD Kwikform specialises in construction areas such as formwork, falsework and ground-shoring, and operates in countries including the UK, United Arab Emirates and Australia.
Interserve looked at selling the division two years ago but decided to retain ownership of it after an eight month strategic review, arguing that “the structural drivers for global infrastructure remain strong”.
The precise value of RMD Kwikform in any spin-off to the company’s lenders is unclear, although analysts have consistently valued the subsidiary at between £250m and £300m.
The exploration of a plan to effectively demerge RMD Kwikform to its lenders underlines the need for one of Britain’s biggest outsourcers to examine creative ways of keeping itself afloat.
Interserve employs 45,000 people in the UK, but has been financially crippled by a disastrous foray into the waste-to-energy sector.
Its troubles, which have seen its shares collapse further in the last fortnight after it conceded that it was likely to require a debt-for-equity swap, have raised echoes of Carillion, the construction giant which went bust in January.
And they have sparked concern in Whitehall, which depends upon Interserve for the delivery of numerous government public services contracts.
Sky News revealed earlier this week that Interserve’s lenders had drafted in bankers from Lazard to help stitch together a make-or-break restructuring.
EY is also working for the company’s banking syndicate, while Deloitte is advising the Cabinet Office on the situation.
Interserve’s board is being advised by Rothschild.
The company said it was “working with its advisers to look at all options to deliver the optimum capital structure for the group to support its long-term sustainable development”.
A comprehensive restructuring plan is unlikely to be finalised until February.
It is expected to comprise a debt-for-equity swap and issue of new shares, as well as amending its financing agreements by extending debt maturity dates and repayment profiles, according to the company.
“Our lenders are supportive of the deleveraging plan which will underpin the long-term future of Interserve,” Debbie White, its chief executive, said this week.
It saw its shares plunge by more than half on Monday after warning that investors were likely to see “material dilution” from its debt reduction efforts.
Interserve has about £600m of debt, more than half of which is likely to be converted to equity under its plans.
Investment banks including JPMorgan, Numis and Peel Hunt expected to be engaged to assist with a further equity fundraising.
Interserve is one of the UK’s biggest private sector employers in areas such as office-cleaning, while it also provides support to Britain’s armed forces in Cyprus, Gibraltar and the Falkland Islands.
The Cabinet Office has insisted that it does not view the company as a replica of Carillion and continues to have confidence in it.
The crisis surrounding Interserve’s finances has persisted for more than a year, with the company initially blaming economic uncertainty and weak Government spending for a massive profit warning in the autumn of 2017.
It is the latest in a string of UK outsourcers to face material uncertainty over its finances, with Carillion’s insolvency coming in the wake of rescue efforts at Capita and Serco.
In recent weeks, Kier Group, another major industry player, has announced plans to raise more than £250m by selling new shares – a move which has caused its own share price to plummet.
Interserve declined to comment on Saturday.