Debt fears knock up to 75% off the value of ‘Carillion mark two’

FEARS grew for one of the Government’s largest contractors yesterday after its shares fell in value by up to 75 per cent.

Interserve, which works in schools, the NHS, prisons and other state sectors, is struggling with massive debts. Union bosses last night warned that it could become ‘Carillion mark two’ and follow in the footsteps of its rival which went under earlier this year with nearly £7billion of debt.

On another bleak day for Britain’s outsourcing industry, Interserve shares fell as low as 6p, losing nearly 75 per cent of their value in a day, before recovering slightly to close down 53 per cent at 11.5p.

Less than five years ago, the stock was trading at 745p, valuing the company at £1.1billion. But its value has fallen by more than 98 per cent since then to £17million.

Russ Mould of online stockbroker AJ Bell, said: ‘Almost a year since Carillion’s problems became apparent, its peer Interserve appears to be losing the confidence of investors.’ He said a ‘huge business’ now had the type of valuation ‘typically reserved for smaller businesses which are not yet making any money’.

Interserve yesterday said it was seeking a deal with its lenders to reduce its crippling £650million debt burden. It also revealed it has won a contract to help redevelop the Prince Charles Hospital in Merthyr in Wales. The £25million deal is worth more than the entire company but just a fraction of the debt.

Interserve employs more than 70,000 worldwide – including around 45,000 in the UK. Around 70 per cent of its turnover comes from UK Government contracts. Union Unite, which represents 1,200 Interserve staff, called on ministers to reveal their contingency plans in case the firm goes under. Gail Cartmail of Unite said: ‘ The mistakes made before the collapse of Carillion in January 2018 appear in danger of being repeated.’

The GMB union demanded Government assurance for Interserve workers, while the RMT rail union called for Interserve rail contracts to be brought in-house to ‘avoid chaos’.

RMT general secretary Mick Cash said: ‘Interserve hold a number of contracts in our industry, including major stations facilities management work.’

The deal being discussed with its lenders – a so-called debt for equity swap – would see a substantial proportion of its borrowing converted into shares in the company.

Interserve said a final deal would be announced early next year, and insisted the Cabinet Office has expressed full support for its recovery plan.