Is another big firm set to fold like Carillion?

ONE of the Government’s largest contractors is seeking a rescue deal as it struggles with debts of over £600million.

Interserve, which works with the NHS, schools and prisons, has asked lenders for a bailout for the second time in a year ahead of repayments that are due in early 2019.

The company is worth about £37million and employs 45,000 in the UK. But it is on course to have a debt mountain of at least £625million by the end of this year, sparking fears of a Carillionstyle collapse. The growing debt has seen Interserve hit by rising interest payments while it is also facing problems with one of its large contracts.

The mounting pressure on Interserve follows the demise of Carillion, which went bust in January owing nearly £7billion. That threw hundreds of projects into turmoil and jeopardised thousands of jobs.

Interserve’s projects include improving a junction of the M5, managing services at King George Hospital in east London, and upgrading sewers for Northumbrian Water.

It is also the largest provider of probation services, supervising about 40,000 offenders.

The company received a bailout in March but it now finds itself asking creditors, including HSBC and RBS, for more help after its debts grew faster than expected. Creditors have been asked to lighten the firm’s debts in exchange for shares. Chief executive Debbie White said: ‘Our discussions with our lenders are a positive step in the process that was agreed in April. The fundamentals of our business remain strong.’

A source close to Interserve’s lenders said talks so far had been ‘supportive’.

Interserve has seen its shares plunge by more than 75 per cent this year as investors fret over the outsourcing industry, where major Government projects have wafer-thin profit margins.

This means they can quickly turn into expensive failures if something goes wrong.

Interserve recently warned that a project in Derby to create a plant that turns rubbish into energy was behind schedule.

Along with other outsourcers, Interserve has been asked by the Government to draw up a ‘living will’ to prevent public services being plunged into chaos if it collapses.

Labour yesterday called for Interserve to be banned from bidding for public contracts.

Jon Trickett, shadow minister for the Cabinet Office, said: ‘The Government must ensure they are prevented from bidding for public sector contracts until they have proved they are financially stable and there is no risk to the taxpayer.’

Last night a Government spokesman said: ‘The company successfully raised new debt facilities earlier this year, and we fully support them in their long-term recovery plan.’

‘Risk to the taxpayer’