Now hedge funds target Interserve as shares slump
HEDgE funds have increased their bets against troubled outsourcer Interserve as its shares crashed another 12pc amid concerns it was struggling to raise cash from lenders.
The FTSE 250 contractor’s shares reached a record low of 57p last night as fears grew about its financial strength after two profit warnings and the collapse of rival Carillion.
In recent days, four hedge funds have increased their stakes in Interserve, with 7.52pc of its stock now shorted – meaning that investors are betting its share price will fall even further.
Carillion had 14pc of its stock shorted when it collapsed last month.
Those with large holdings of shorted Interserve stock include Squarepoint ops and oxford Asset Management. Hedge fund Marshall Wace, which made a killing correctly predicting Carillion’s demise, now has a short position of nearly 2pc in Interserve, according to latest records.
Interserve, which employs 80,000 people, including 25,000 in the UK, has had more than 75pc wiped off its value in the past six months. Management yesterday attempted to halt the share price slide, rejecting reports of problems with the banks and comparisons with Carillion.
It was not enough, however, with shares slumping another 12pc to just 57p by the close.
Interserve, which provides security, probation, healthcare and construction services, cleans the London Underground and manages army barracks, has been in trouble since a profit warning in September. It issued a second profit warning in october, when it also warned it could breach loan conditions for December, and opened discussions with lenders. Debt is expected to top £500m. Chief executive, Adrian Ringrose, 50, and finance boss, Tim Haywood, 53, quit last year as troubles mounted, with Debbie White, 56, stepping in as chief executive.
Things appeared to be improving on January 10 when the firm said it expected 2018 profit to be ahead of expectations. But the share price was hammered when Carillion collapsed days later, and on January 17 the Financial Times published a report saying Cabinet officials were monitoring Interserve due to concerns over its financial health.
Reports then emerged earlier this month the government had hired accountancy firm Deloitte to advise on public sector contracts held by Interserve. This weekend, the Sunday Telegraph claimed Interserve was struggling to put together debt refinancing to replace a £180m credit line due to run out at the end of March. Interserve’s banks include Lloyds, RBS, Barclays and HSBC – all of which are thought to have lost heavily from Carillion.
Yesterday the firm’s bosses said: ‘We do not in any way recognise the assertion that our discussions with lenders on long-term financing have stumbled. We remain confident of reaching a positive outcome.’
A Cabinet office spokesman said: ‘ We monitor the financial health of all of our strategic suppliers, including Interserve. We do not believe that any of our strategic suppliers are in a comparable position to Carillion.’