Interserve investors take fright as firm explores stock dilution

STOCK: Millions wiped from market value as group’s share price plunges

Shares in Interserve plummeted yesterday after the contractor said shareholders were likely to see their stakes diluted as part of a plan to cut its debt.

It emerged over the weekend the company, which holds government contracts for a range of services in prisons, schools and hospitals, was holding talks with lenders over its £500 million debt pile.

In a statement released to the market yesterday morning, Interserve said a plan had not yet been finalised but was likely to involve “material dilution” for current shareholders.

Shares in the company – which carried out the multi-million-pound refurbishing of Dundee’s Malmaison Hotel and which currently holds a multimillion cleaning contract for Perth power giant SSE – dropped as much as 75% to just 6p in early trading.

Chief executive Debbie White said the discussions were a positive step.

“Our refinancing in April of this year contemplated the development of a deleveraging plan in consultation with our stakeholders and the liquidity injected at that point also gave us the funding to execute our business plan,” she said.

“Our discussions with our lenders are a positive step in the process that was agreed as part of the April refinancing.

“The Cabinet Office has also expressed full support for the work we are doing to implement our long-term recovery plan.

“The fundamentals of our business remain strong. The deleveraging plan will give Interserve a strong long-term capital structure and provide a solid foundation on which to build the future success of the group.”

Interserve’s stock partially rallied from its early shock to close the session down 13p at 11.5p last night.

The fundamentals of our business remain strong. DEBBIE WHITE, INTERSERVE CEO

Shares in Interserve crashed yesterday as details of a stock dilution plan were revealed.