EY reportedly in line to administrate ailing Interserve
As a standoff between shareholders and lenders at Interserve looks to continue well into the eleventh hour, EY has reportedly been earmarked to oversee an administration of the outsourcing firm. With a rescue plan for the company currently hanging in the balance, some 45,000 UK jobs could be on the line.
Over a year after Carillion fell into shock administration, the shadow of the collapsed government contractor still hangs heavy over the outsourcing industry. Now, one of the UK's largest providers of public services, Interserve, is reportedly teetering on the brink of collapse, following a year of being touted as ‘the next Carillion’.
The multinational support services and construction company based in the UK previously boasted a revenue of £3.2 billion in 2015, and a workforce of more than 75,000 people worldwide – 45,000 of whom are based in Britain. However, following a number of sharp declines, in late 2018, the firm’s shares tanked sharply as shareholders reacted badly to a rescue plan for what has proven to be a protracted crisis for the company.
Since then, the largest holder of Interserve’s stock has come forward with a counter proposal to the initial solution from lenders, which it labelled “an obscenity”. The new suggestions include a £75 million rights issue, and it is thought to be unlikely that lenders will accept it – particularly as Interserve’s lenders are understood to have lined up Big Four firm EY to manage the firm’s administration.
The hedge funds Coltrane and Farringdon, which own about 34% of the firm, were expected to vote against the debt-for-equity swap, which would massively dilute their stakes. While a report from Sky News has claimed that lenders may be prepared to revise the plan to give shareholders up to 5% of the business, however, the counter plan from Coltrane would hand only 65% of the company to creditors in exchange for £436 million of debt, leaving shareholders with an improved 10% of the equity, according to the Guardian.
While the move to position EY as would-be-liquidators is a precautionary measure, sources suggest it bodes badly for those who are still hoping for an agreement on the terms of a financial restructuring plan. One senior source familiar with discussions told the Guardian that a team led by EY’s Hunter Kelly, who worked on the House of Fraser pre-pack administration, has been earmarked to reprise the role with Interserve.
EY has expansive knowledge of the inner workings of Interserve, having previously been hired as an economic advisor to the firm alongside Big Four rival PwC and Oliver Wyman in 2017. While this would likely position the firm well for a role overseeing such an administration, however, it by no means guarantees its position.
The professional services giant was said to be in line to administrate Carillion early in 2018, thanks to its role in reviewing the company’s finances in the Summer of 2017. However, EY was eventually pipped to the post by PwC, which took on the lucrative administration instead.
