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Meta
Good to get a view from you but....
Let's face it they won't go bang....
Even a pre-pack admin (which will not happen) will see Employees stay in their current jobs.
Too much value here still and everyone knows it.
The underlying business is still strong and profitable.
No one kicks a dead dog.
Everyone involved is positioning themselves to get the biggest chunk of Interserve they can.
Why? Because in reality they have good people and the right values. Yes they have made mistakes. Yes they have a cash issue. But they were never a carillon (from a debt perspective).
Look at the way they treated their Pension scheme - no deficit.
A good solid company that made bad decisions. Still a good solid Business and will be in the future.
Coltrane & the Lenders will do a deal, because they both see the value.
The present deal in my view is too advantageous to the lenders.
Interserve will survive and be strong in the future. But they will be judged by many, on how they resolve the current crisis.
I don't believe they will be judged well, if they panic and give too much to the lenders. Yes a difficult situation, but they need to believe in themselves and their people and not just hand it all over to the lenders.
Look at what they have, look at the future opportunity, see the true value of this Business - overcome the short term cash issues, reduce the debt ( OK this is easy said than done), but the future still demands the services they provide.
GL
Meta,
How will the lenders not get nothing if this goes to prepack??? Lenders will get something either way.
It’s shareholders that need to be on the edge here.
It looks as though Coltrane are posturing to challenge the proposed deal in some way. A salt the earth strategy, unless they have 66m to stump up plus the rest of the debt due. Everyone loses if they go bang: Shareholders, obviously get nothing Lenders, get nothing (but at least they get to stop throwing good money at the bad) Board get nothing, but their pay and bonuses already paid, should soften the blow. Sadly the employees and suppliers get the worst deal, which should forever stay on the consciences of those involved, including shareholders intent on blocking the only deal that could keep the company going.
Bill
Totally agree PR disasters every week for Interserve over the last few weeks - they should invest in a PR department.
They do say "there is no such thing as bad publicity" but Interserve are doing their best to prove that one wrong.
Yes too much negativity, surely it's about time, they get on the front foot and put a positive spin on this mess. They are making Brexit look well organised at the moment.
Do the right thing - look after the people who believed in you and invested in you.
They started with two great companies Tilbury & RM Douglas. How far has this business moved away from that origin ?
Once there was a way,
To get back homeward.
Once there was a way
To get back home.
Feilb,
With the most recent findings on the loan conditions, I don’t think the lenders have left much for Coltrane to play hard ball with. From the blocking of any restructuring deal, to the removal of key players of the board in the rescue deal, it seems they have all basis covered.
The only hopeful I can see here is Coltrane pushing through a better deal for all shareholders, or the BOD renogiating the deal by recognising their mistake. However if it’s anything like Mouchel, we know what their preference would be.
There is too much negativity on IRV at the moment so would be wise for them to do the right thing here.
Bill,
The worst the SP will end up at is 8p, but I see far more of an upside post DfE (in whatever form).
The Pre-pack route was probably the BoD's Plan B - But Coltrane will block that (by replacing the BoD) if they do not get an agreement (paid off) in advance.
3 scenarios -
Current proposed deal goes through SP starts at 8p and rises slowly over time - low debt - high EBITDA - EfW past etc..
BoD replaced, Coltrane push through better deal for ex. shareholders - SP will rise could be significant - but to what level will be based on deal
Current BoD re-negotiate a better deal with Lenders - Coltrane on board - SP will rise dependent on deal
If BoD are replaced Lenders could possibly demand £66m, but Coltrane could also play hard ball. Move all the debt to Interserve FM, sell off Construction and RMD (very cheaply) debt free as separate companies - Put FM into administration - Lenders get close to nothing back (this would be dependent on the original loan deals but there would be some route that Coltrane could no doubt take to recover their money and screw over the Lenders)
Feilb- the issue I see with holding these shares at the moment is the fact that if the BOD decide to go down the prepack route. We won’t even get a penny a share then, compared to the 10p a share they’re currently worth.
Also if the refinancing is blocked £66m becomes due which triggers a default and makes the prepack deal even easier. Not sure where this £66m can come from straight away, unless Coltrane and Farringdon offer a short term loan.
Pretty sure UBS also have 3% holding here.
Also have noticed there has been at least one large trade out of hours the last week so, where someone is buying 300-400k shares at a time. Is it someone on behalf of the lenders I wonder?
RNS providing confirmation that Coltrane have called back in their 10% shares
So rather than 17% plus 10% they now directly hold their 27%.shares
Bill,
A couple of views on your posts.
I'm not sure holding shares at the moment is a problem, as it cannot get much worse. Currently 10p and could theoretically go down to 8p, so not a lot to lose really. (if 6bn shares will be issued at 8p then after the DfE the SP will be 8p) . Coltrane will replace the BoD to prevent a Pre-Pack if they don't get "bought off" imo, so I don't think a "Plan B pre-pack admin" could happen.
I don't see a transaction of buying Coltrane & Farringdon's shares above the market rate as being illegal, as this is just a straight purchase between two parties at an agreed level before and DfE is carried out.
Good point re. Standard Life, but if Lenders or BoD buy out Coltrane / Farringdon they will have the voting rights (33%) and will carry their DfE deal. Private Investors unfortunately will not mobilise together and vote in numbers.
I'm not sure which other II's have large holdings if any. My guess is rest of shares sit with Private Investors and Insiders.
Hopefully Coltrane & Farringdon look out for all ex. shareholders, but we know where their priority will be.
I cannot seeing Coltrane & Farringdon purchasing more shares. To buy 2bn shares at 8p will still cost them £160m and their existing holding has already been diluted. The company has given them the option of doing this in the RNS, but I cannot see why they would or any advantage to them.
You are correct Interserve need to communicate and soon.
I still believe they will be stating an EBITDA of between £170M and £175M, which will be incredulous considering the deal they are proposing!
I think that the BoD will stay silent though, until they have an agreement with Coltrane.
Another possibility maybe 2bn shares are set aside for Farringdon and Coltrane to purchase at 8p a Share? This way they still retain a 3rd of the company and the debt still goes down by 480m.Going back to the RNS which said “new equity which maybe offered to existing shareholders or investors”
I think the shareholders will see some sort of accounts very soon so they can make an informed decision on their vote
Feilb- that’s a very strong possibility hence I’m nervous about holding these now. If Coltrane and Farringdon are bought out as you say, then the rest of us will be worse off than the proposed debt for equity deal. However according to the media Coltrane were urging other investors to support their cause to get a “more equitable outcome for shareholders”, so you’d like to think this meant they were looking at the overall picture. Wouldn’t this be illegal though as normally when something like this happens, it’s one offer for the whole equity (1p a share in the Mouchel Scanario), rather than preferential deals for a certain class shareholders.
Also Standard Life Aberdeen have been very quiet and they hold 6.9% so a big amount. If they get wind of any back door deal with Coltrane then they are as likely to kick off a fuss.
Lastly going back to the Mouchel Scenario did you notice the amount of “fees” the chairman and CEO were given to get the deal through?
Do we know who the other institutional funds that have a reasonable position here?
Good contribution Bill,
Your research leads to a number of interesting possibilities...
Lets say you are correct and the BoD's plan B is a "mouchel" pre pack administration:
There are two votes coming - the vote to remove the BoD and the vote on the deal.
The mouchel scenario makes the second vote on the deal irrelevant in respect if Coltrane win they lose anyway.
This means the first vote becomes more important. But I think that Coltrane & Faringdon have in reality already won the first vote, in respect that they have circa 33% of the vote already and a 50% turn out is the norm.
So the BoD know that the only way their deal or a "mouchel pre pack" can be stopped, is if the BoD get replaced with Coltranes' proposed Directors.
Knowing this, I suspect that the current BoD are trying to buy off Coltrane and Farringdon (to the expense of the remaining shareholders).
I imagine the Lenders / BoD are now negotiating to buy the Coltrane & Farringdon shares at a premium. Between them they hold a 3rd of Interserve shares - currently the total value of the Business is circa £15M so they own £5M.
Imagine if the Lenders & BoD offered to buy out Coltrane & Farringdon at 4 x the current SP. So Coltranes' and Farringdon's £5m of shares become worth £20m. Coltrane and Farringdon walk away with something and the Lenders and BoD get their deal through.
The rest of the existing shareholders are now stuffed.
By the lack of communication from Coltrane & Farringdon, I am guessing they are trying to negotiate the best deal for themselves in the background.
Thoughts?
Done a bit of digging and seems like management are proposing the same deal we saw with Mouchel a few years ago.
A new company was formed of which the equity was split 80/20 between the lenders and management team respectively. I have a suspicion something similar is being drawn up here, hence management are keen to get the deal through. Not only will they get to keep their salaries, but have a slice of the profits too so it’s a winner for them. Makes you wonder it’s not just the lenders being greedy, but the management having an equal amount of greed and hence colluded with the lenders for such a ridiculous plan.
https://www.theconstructionindex.co.uk/news/view/banks-take-over-mouchel-in-pre-pack-deal
Thanks Feilb. The RNSs certainly need investigating as my entire investment in IRV has been from the RNS from 2016 onwards which as we know now were all a work or art. They have lied through the tweet and so has the earlier ones from DW. Like you say investing is n stocks has a risk which we all accept, but how can you make an informed the decision when the information you have been given is false.
Bill,
At this point in time, existing shareholders hold a small amount of power - two votes to come.
Following any deal, in reality existing shareholders will have no power whatsoever.
Unless the BoD start communicating / explaining their current deal and why it is necessary, I foresee a backlash.
It is difficult for existing shareholders to see their investments wiped out, but most would probably accept this as part of investing in stocks - if they understood that the deal was balanced and necessary.
The difficulty existing shareholders have is the deal does not appear to be balanced or necessary and Interserve are silent. The other difficulty existing shareholders have will (as you have pointed out) have is the genuineness of the RNS's over the past two years.
And the latest RNS indicates a EBITDA of between £170m and £175m - if this is the case then I cannot see how the present proposed deal stacks up.
Hence the BoD need to communicate.
Feilb- I don’t think they can answer that on, as the answer is in the telegraph which they are out of their depth. They are far from the top management (turn around specialist) team they are made to be, and now are just following their lenders/advisers lead like a bunch of lost sheep. They have made the situation worser than Ringrose had left it.
I note you say they may regret disregarding their shareholders. Can you clarify what you mean by this? Are you expecting some sort of action from SH?
They have also wiped out the interests of many hard working employees which will also make them look like ????? heroes.
"Shameful Stitch-up"The Lenders get 6.150bn shares at 8p (more like 12p but regardless) = post Dfe Business will be therefore worth £492MThey own 97.5% of £492m = £479.7M they still hold £350 debtAdd the two together = £829.7m this is more than the current £755m debtSo they make an immediate profitBUT The 8p share price is really 12p, so their £479.7 is actually £640m £640m plus £350 debt is £990m versus £755 debtBUT The SP has every chance of rising to 16p (low debt, no EfW, EBITDA £182m) soThe Lenders are likely to get £800m plus £350m debt = £1.15bn"Shameful Stitch-up".
Bill,
It would be good to hear from the Interserve BoD, why the current proposed deal is not a "shameful stitch-up".
Existing shareholders surely are due an explanation to that accusation at the very least.
Communication to existing shareholders has been non existent.
After the deal, if it is pushed through, existing shareholders will not matter any more. But the BoD seem to have taken this for granted before it has happened and dismissed existing shareholders.
They may have dismissed and ignored the existing shareholders too prematurely and could end up regretting it.
Justification is that in the UK we have a free market, capitalist system.
Here hop in- no one is asking for charity figures just a fair deal. If the banks were taking some pain, then no one would be arguing the toss here or indeed Coltrane. But how do you justify the banks doubling/troubling their money, not to mention the 10% interest they have had in the mean time.
Feilb- I don’t think these morons will change their mind as the last I heard they were still looking to push this deal through. Not sure what pressure Coltrane have applied or are in the process and of applying here. I’m guessing there will be some legal recourse here if the deal is forced through? Also with the latest article surfacing about the £66m being repayable should the financing not go through, maybe Coltrane will back off?
I still don’t think there is a need to reduce debt so drastically though. If they can get to £500m via D4E then they can easily reduce £300m in the next few years through cash generation and disposals.
How about they issue 1bn share at 48p which wipes off 480m. The lenders value stays the same for now but then there is a possibility of it recovering to 90p-£1. Sell this to existing equity holders at a later date for 70p and you walk away with 220m plus all the dividends in the meantime.
The deal needs to be far far more fairer imo. What do we think will happen if the deal is forced through? Coltrane and Farringdon go legal route?
not looking so good here
I am going to revise that calculation from 2bn shares to 1.5bn shares.
Based on the post DfE valuation :
I would accept a deal that gives the Lenders 1.5bn shares at 32p. This wipes out £480m debt and gives the Lenders 90% of Interserve leaving 10% for existing shareholders and a realistic chance the SP could reach 65p in the future.
Bill,
Interesting article in the telegraph.
Now the mainstream media have caught up and worked out the deal is too biased towards the Lenders, the BoD hopefully will acknowledge they have made a mistake and revisit the deal. For 97.5% of Interserve there should be zero debt - not £350m.
If Interserve retain £350M debt, then only 2bn new shares should be issued Imo and based on the post DfE valuation of a Business with over 3bn turnover and EBITDA over 170M with EfW behind them.
Piglet on-so much for having a first class management team with a track record which the media kept repeating at the time. They were clearly out their depth, but now make it to be the situation was worser than they thought.