20 March 2019 | Herpreet Kaur Grewal
Oliver Dowden, Parliamentary Secretary at the Cabinet Office, has told Parliament that "nothing in Interserve's refinancing will affect the delivery of public services" and "no staff have lost jobs and no pensions have been affected".
Dowden, who was responding to a question in the House, also said that the company had executed a contingency plan that it had "prudently developed in case shareholders rejected the proposed refinancing deal".
He said: "This was a pre-agreed transaction, known as a "pre-pack" administration. Hundreds of pre-pack administrations are performed every year, including by well-known companies. It is a well-established and normal process, typically used when a shareholder is blocking a business's restructuring.
"Although the corporate structure of Interserve changed on Friday [15 March], I reassure all honourable members that public service delivery remains wholly unchanged," he added.
When asked whether this situation was "a near miss" compared with Carillion, Dowden said: "The situation with Carillion was very different: it had problems across all its contract base and issues with its management, which are currently being explored. In this case, there is a specific issue in relation to some of the energy-for-waste contracts, which are being dealt with. The company sought to refinance to strengthen its balance sheet.
"It failed to do that because of the position taken, some might say, by some greedy capitalists, in respect of some of the hedge funds that owned shares in the company and refused to consent to its restructuring. Nonetheless, it has gone through a pre-pack, and as a result its position has strengthened considerably. It has £100 million more on the balance sheet and it has reduced its debts considerably."
He added that after Carillion "we must ensure that we strengthen the supply chain".
One of the ways in which he said the government is doing this is through increased diversity, "particularly by enabling small and medium-sized enterprises to bid and win government contracts.
"That is why we have reduced complex pre-qualification questionnaires, why we have set a very demanding target of 33 per cent of all contracts going to SMEs, and why in November I announced proposals to ensure that strategic suppliers who did not pay their subcontractors on time would face exclusion from winning government contracts."