7 January 2019 | Herpreet Kaur Grewal
Interserve continues to be in "constructive discussions with its lenders, who are fully supportive of Interserve's business plan and management team", according to its latest official update.
The key commercial principles on which the deleveraging plan is expected to be based have now been conditionally agreed between Interserve and all lenders.
In summary these are:
The deleveraging plan will deliver a strong balance sheet targeting leverage of less than 1.5x net debt/EBITDA by the end of 2019.
* Debt retained by Interserve will have terms consistent with the debt of a well-capitalised UK corporate.
* The deleveraging plan includes the conversion of a sufficient amount of Interserve's senior debt into new Interserve ordinary shares (the 'New Equity') in order for Interserve to achieve its target leverage.
As previously announced, it is anticipated that the issue of new equity will result in material dilution for current Interserve shareholders.
It is currently intended that a portion of the new equity will be offered to existing Interserve shareholders and new investors through a public offering of the New Equity (the "Public Offering"), although the implementation of the deleveraging plan is not conditional upon a successful Public Offering.
The final form deleveraging plan, which will be subject to Interserve shareholder and lender approvals, will be announced in early 2019. Agreement from bonding providers and the Pension Trustee will also be required and constructive discussions with them are continuing.
Consideration is also being given to whether it would be in stakeholders' interests for the board to agree to lender requests for Interserve's RMDK business to be placed in a separate holding company owned by the lenders.
In addition, Interserve has reached agreement with its lenders to defer a payment due under its principal debt facilities on 1 February 2019 to 30 April 2019.
Debbie White, CEO of Interserve, said: "This progress on the deleveraging plan is excellent news for all our employees, customers and suppliers. It will provide us with a strong balance sheet and enable us to move forward with confidence and the ability to improve our business and deliver our long-term strategy."
But Interserve added that the announcement contained "forward-looking statements in respect of the group and its Deleveraging Plan" and "by their nature, these statements involve uncertainty, known and unknown risks and other factors and therefore assurance cannot be given that any particular expectation will be met".
It added: "In particular, while Interserve continues to work towards the implementation of the Deleveraging Plan in the first quarter of 2019, there can be no assurance that the Deleveraging Plan will be implemented unless and until agreements have been reached with several parties and until all conditions are satisfied."